Bill not drafted by TLC or Senate E&E.

      Line and page numbers may not match official copy.

      By Lewis of Orange                                 H.B. No. 5

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the development and management of the water resources

 1-3     of the state; providing penalties.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5                   ARTICLE 1.  DROUGHT RESPONSE MANAGEMENT

 1-6           SECTION 1.01.  Subchapter C, Chapter 16, Water Code, is

 1-7     amended by adding Section 16.060 to read as follows:

 1-8           Sec. 16.060.  STATE DROUGHT PLANNING.  (a)  The executive

 1-9     administrator shall prepare, coordinate, and oversee the

1-10     development and implementation of a comprehensive state drought

1-11     plan.  The board is the state agency primarily responsible for

1-12     ongoing drought and water supply monitoring, technical and

1-13     financial assistance for drought planning, and administrative

1-14     support of committee functions.

1-15           (b)  The state drought plan shall provide for the initial

1-16     development and updating of effective regional and local drought

1-17     response plans.

1-18           (c)  The board may provide cost-sharing financial assistance

1-19     from the research and planning fund to assist local governments in

1-20     the development of regional and local drought response plans.

1-21           (d)  The drought planning and monitoring committee is

1-22     created.  The committee is composed of one representative from each

1-23     of the following entities, appointed by the administrative head of

 2-1     that entity:

 2-2                 (1)  the board;

 2-3                 (2)  the commission;

 2-4                 (3)  the Parks and Wildlife Department;

 2-5                 (4)  the division of emergency management in the office

 2-6     of the governor;

 2-7                 (5)  the Department of Agriculture; and

 2-8                 (6)  any other entity designated by the governor.

 2-9           (e)  The representative of the board shall serve as chair of

2-10     the committee.

2-11           (f)  The committee shall be responsible for:

2-12                 (1)  the assessment and public reporting of drought

2-13     monitoring and water supply information;

2-14                 (2)  advising the office of the governor on significant

2-15     drought concerns;

2-16                 (3)  recommending specific provisions for a defined

2-17     state response to drought-related disasters for inclusion in the

2-18     state emergency management plan;

2-19                 (4)  recommending specific provisions for water

2-20     management strategies to be used during droughts and included in

2-21     approved regional water management plans under Section 16.059;

2-22                 (5)  advising the board on preparation of the state

2-23     drought plan;

2-24                 (6)  ensuring effective coordination among state,

2-25     local, and federal agencies in drought-response planning; and

2-26                 (7)  establishing guidelines for the development of

2-27     effective regional and local drought response plans, taking into

2-28     account the provisions of water conservation plans developed under

2-29     Section 11.1271 and drought contingency plans developed under

 3-1     Section 11.1272.

 3-2           (g)  In performing its duties under this section, the drought

 3-3     planning and monitoring committee shall consider the following

 3-4     factors when determining whether a drought exists for the purposes

 3-5     of this section:

 3-6                 (1)  meteorological conditions and forecasts;

 3-7                 (2)  hydrological conditions and forecasts;

 3-8                 (3)  water use and demand forecasts;

 3-9                 (4)  water supply conditions and forecasts;

3-10                 (5)  the potential impacts of the water shortage on the

3-11     public health, safety, and welfare and on economic and

3-12     environmental resources; and

3-13                 (6)  other factors deemed appropriate by the committee.

3-14           SECTION 1.02.  Subchapter D, Chapter 11, Water Code, is

3-15     amended by amending Section 11.1271 and adding Section 11.1272 to

3-16     read as follows:

3-17           Sec. 11.1271.  ADDITIONAL REQUIREMENTS:  WATER CONSERVATION

3-18     PLANS.  (a)  The commission may require the formulation and

3-19     submission of a water conservation plan and the adoption of

3-20     reasonable water conservation measures, as defined by Subdivision

3-21     (8)(B), Section 11.002, of this code.

3-22           (b)  The commission may require the holder of an existing

3-23     permit, certified filing, or certificate of adjudication for the

3-24     appropriation of surface water in the amount of 200 acre-feet a

3-25     year or more to develop and implement a water conservation plan

3-26     that adopts reasonable water conservation measures, as defined by

3-27     Subdivision (8)(B), Section 11.002, of this code.

3-28           Sec. 11.1272.  ADDITIONAL REQUIREMENTS:  DROUGHT CONTINGENCY

3-29     PLANS FOR CERTAIN APPLICANTS AND WATER RIGHT HOLDERS.  The

 4-1     commission shall by rule require wholesale and retail public water

 4-2     suppliers to develop drought contingency plans to be implemented

 4-3     during periods of water shortages caused by drought.

 4-4           SECTION 1.03.  Subchapter C, Chapter 11, Water Code, is

 4-5     amended by adding Sections 11.0841, 11.0842, and 11.0843 to read as

 4-6     follows:

 4-7           Sec. 11.0841.  PRIVATE CIVIL REMEDY.  Nothing in this chapter

 4-8     affects the right of any private corporation or individual to

 4-9     pursue any available common-law remedy to enforce a right or to

4-10     prevent or seek redress or compensation for the violation of a

4-11     right or otherwise redress an injury.

4-12           Sec. 11.0842.  ADMINISTRATIVE PENALTY.  (a)  If a person

4-13     violates this chapter or a rule or order adopted or a water right

4-14     issued under this chapter, the commission may assess an

4-15     administrative penalty against that person as provided by this

4-16     section.

4-17           (b)  The penalty may be in an amount not to exceed $10,000

4-18     for each day the person is in violation of this chapter or the

4-19     rule, order, or water right.  Each day a violation continues may be

4-20     considered a separate violation for purposes of penalty assessment.

4-21           (c)  In determining the amount of the penalty, the commission

4-22     shall consider:

4-23                 (1)  the nature, circumstances, extent, duration, and

4-24     gravity of the prohibited acts, with special emphasis on the

4-25     impairment of existing water rights or the hazard or potential

4-26     hazard created to the health, safety, or welfare of the public;

4-27                 (2)  the impact of the violation on the instream uses,

4-28     water quality, aquatic and wildlife habitat, or beneficial

4-29     freshwater inflows to bays and estuaries;

 5-1                 (3)  with respect to the alleged violator:

 5-2                       (A)  the history and extent of previous

 5-3     violations;

 5-4                       (B)  the degree of culpability, including whether

 5-5     the violation was attributable to mechanical or electrical failures

 5-6     and whether the violation could have been reasonably anticipated

 5-7     and avoided;

 5-8                       (C)  demonstrated good faith, including actions

 5-9     taken by the alleged violator to rectify the cause of the violation

5-10     and to compensate affected persons;

5-11                       (D)  any economic benefit gained through the

5-12     violation; and

5-13                       (E)  the amount necessary to deter future

5-14     violations; and

5-15                 (4)  any other matters that justice may require.

5-16           (d)  If, after examination of a possible violation and the

5-17     facts surrounding that possible violation, the executive director

5-18     concludes that a violation has occurred, the executive director may

5-19     issue a preliminary report stating the facts on which that

5-20     conclusion was based, recommending that an administrative penalty

5-21     under this section be imposed on the person charged, and

5-22     recommending the amount of the penalty.  The executive director

5-23     shall base the recommended amount of the proposed penalty on the

5-24     factors provided by Subsection (c) of this section and shall

5-25     analyze each factor for the benefit of the commission.

5-26           (e)  Not later than the 10th day after the date on which the

5-27     report is issued, the executive director shall give written notice

5-28     of the report to the person charged with the violation.  The notice

5-29     shall include a brief summary of the charges, a statement of the

 6-1     amount of the penalty recommended, and a statement of the right of

 6-2     the person charged to a hearing on the occurrence of the violation,

 6-3     the amount of the penalty, or both the occurrence of the violation

 6-4     and the amount of the penalty.

 6-5           (f)  Not later than the 20th day after the date on which

 6-6     notice is received, the person charged may either give to the

 6-7     commission written consent to the executive director's report,

 6-8     including the recommended penalty, or make a written request for a

 6-9     hearing.

6-10           (g)  If the person charged with the violation consents to the

6-11     penalty recommended by the executive director or fails to timely

6-12     respond to the notice, the commission by order shall either assess

6-13     the penalty or order a hearing to be held on the findings and

6-14     recommendations in the executive director's report.  If the

6-15     commission assesses the penalty recommended by the report, the

6-16     commission shall give written notice of its decision to the person

6-17     charged.

6-18           (h)  If the person charged requests or the commission orders

6-19     a hearing, the commission shall call a hearing and give notice of

6-20     the hearing.  As a result of the hearing, the commission by order

6-21     either may find that a violation has occurred and may assess a

6-22     penalty, may find that a violation has occurred but that no penalty

6-23     should be assessed, or may find that no violation has occurred.

6-24     All proceedings under this subsection are subject to Chapter 2001,

6-25     Government Code.  In making any penalty decision, the commission

6-26     shall analyze each of the factors provided by Subsection (c) of

6-27     this section.

6-28           (i)  The commission shall give notice of its decision to the

6-29     person charged, and if the commission finds that a violation has

 7-1     occurred and assesses an administrative penalty, the commission

 7-2     shall give written notice to the person charged of its findings, of

 7-3     the amount of the penalty, and of the person's right to judicial

 7-4     review of the commission's order.  If the commission is required to

 7-5     give notice of a penalty under this subsection or Subsection (g) of

 7-6     this section, the commission shall file notice of its decision in

 7-7     the Texas Register not later than the 10th day after the date on

 7-8     which the decision is adopted.

 7-9           (j)  Within the 30-day period immediately following the day

7-10     on which the commission's order is final, as provided by Subchapter

7-11     F, Chapter 2001, Government Code, the person charged with the

7-12     penalty shall:

7-13                 (1)  pay the penalty in full; or

7-14                 (2)  pay the amount of the penalty and file a petition

7-15     for judicial review contesting the occurrence of the violation, the

7-16     amount of the penalty, or both the occurrence of the violation and

7-17     the amount of the penalty; or

7-18                 (3)  without paying the amount of the penalty, file a

7-19     petition for judicial review contesting the occurrence of the

7-20     violation, the amount of the penalty, or both the occurrence of the

7-21     violation and the amount of the penalty.

7-22           (k)  Within the 30-day period, a person who acts under

7-23     Subsection (j)(3) of this section may:

7-24                 (1)  stay enforcement of the penalty by:

7-25                       (A)  paying the amount of the penalty to the

7-26     court for placement in an escrow account; or

7-27                       (B)  giving to the court a supersedeas bond that

7-28     is approved by the court for the amount of the penalty and that is

7-29     effective until all judicial review of the commission's order is

 8-1     final; or

 8-2                 (2)  request the court to stay enforcement of the

 8-3     penalty by:

 8-4                       (A)  filing with the court a sworn affidavit of

 8-5     the person stating that the person is financially unable to pay the

 8-6     amount of the penalty and is financially unable to give the

 8-7     supersedeas bond; and

 8-8                       (B)  giving a copy of the affidavit to the

 8-9     commission by certified mail.

8-10           (l)  If the commission receives a copy of an affidavit under

8-11     Subsection (k)(2) of this section, it may file with the court

8-12     within five days after the date the copy is received a contest to

8-13     the affidavit.  The court shall hold a hearing on the facts alleged

8-14     in the affidavit as soon as practicable and shall stay the

8-15     enforcement of the penalty on finding that the alleged facts are

8-16     true.  The person who files an affidavit has the burden of proving

8-17     that the person is financially unable to pay the amount of the

8-18     penalty and to give a supersedeas bond.

8-19           (m)  If the person does not pay the amount of the penalty and

8-20     the enforcement of the penalty is not stayed, the commission may

8-21     refer the matter to the attorney general for collection of the

8-22     amount of the penalty.

8-23           (n)  Judicial review of the order or decision of the

8-24     commission assessing the penalty shall be under the substantial

8-25     evidence rule and shall be instituted by filing a petition with a

8-26     district court in Travis County, as provided by Subchapter G,

8-27     Chapter 2001, Government Code.

8-28           (o)  A penalty collected under this section shall be

8-29     deposited in the state treasury to the credit of the general

 9-1     revenue fund.

 9-2           (p)  Notwithstanding any other provision to the contrary, the

 9-3     commission may compromise, modify, or remit, with or without

 9-4     condition, any penalty imposed under this section.

 9-5           (q)  Payment of an administrative penalty under this section

 9-6     shall be full and complete satisfaction of the violation for which

 9-7     the administrative penalty is assessed and shall preclude any other

 9-8     civil or criminal penalty for the same violation.

 9-9           Sec. 11.0843.  FIELD CITATION.  (a)  Upon witnessing or

9-10     receiving competent evidence of a violation of this chapter or a

9-11     rule or order adopted or a water right issued under this chapter,

9-12     the executive director or a watermaster may issue the alleged

9-13     violator a field citation alleging that a violation has occurred

9-14     and providing the alleged violator the option of either:

9-15                 (1)  without admitting to or denying the alleged

9-16     violation, paying an administrative penalty in accordance with a

9-17     predetermined penalty amount corresponding to the type of violation

9-18     and taking remedial action as provided in the citation; or

9-19                 (2)  requesting a hearing on the alleged violation in

9-20     accordance with Section 11.0842 of this code.

9-21           (b)  A penalty collected by a watermaster under this section

9-22     shall be remitted to the commission to pay the necessary expenses

9-23     and compensation of the watermaster who issued the citation.  At

9-24     the end of the fiscal year any unspent money remitted to the

9-25     commission by a watermaster under this subsection shall be

9-26     deposited in the state treasury to the credit of the general

9-27     revenue fund.  A penalty collected by the executive director under

9-28     this section shall be deposited in the state treasury to the credit

9-29     of the general revenue fund.

 10-1          SECTION 1.04.  Section 11.139, Water Code, is amended to read

 10-2    as follows:

 10-3          Sec. 11.139.  EMERGENCY AUTHORIZATIONS [PERMITS].  (a)

 10-4    Except as provided by Section 11.148 of this code, the [The]

 10-5    commission may grant an emergency permit, order, or amendment to an

 10-6    existing water right [for the diversion and use of water] for an

 10-7    initial [a] period of not more than 120 [30] days if it finds that

 10-8    emergency conditions exist which present an imminent threat to

 10-9    [threaten] the public health, safety, and welfare or the

10-10    environment and which override the necessity to comply with

10-11    established statutory procedures and there are no feasible

10-12    practicable alternatives to the emergency authorization.  Such

10-13    emergency action may be renewed once for not longer than 60 days.

10-14          (b)  A person desiring to obtain an emergency authorization

10-15    under this section shall submit to the commission a sworn

10-16    application containing the following information:

10-17                (1)  a description of the condition of emergency

10-18    justifying the granting of the emergency authorization;

10-19                (2)  a statement setting forth facts which support the

10-20    findings required under this section;

10-21                (3)  an estimate of the dates on which the proposed

10-22    authorization should begin and end;

10-23                (4)  a description of the action sought and the

10-24    activity proposed to be allowed, mandated, or prohibited; and

10-25                (5)  any other statements or information required by

10-26    the commission.

10-27          (c)  If the commission finds the applicant's statement made

10-28    under Subsection (b) of this section to be correct, the commission

10-29    may grant emergency authorizations under this section without

 11-1    notice and hearing or with such notice and hearing as the

 11-2    commission considers practicable under the circumstances.

 11-3          (d)  If the commission grants an emergency authorization

 11-4    under this section without a hearing, the authorization shall fix a

 11-5    time and place for a hearing to be held before the commission.  The

 11-6    hearing shall be held as soon after the emergency authorization is

 11-7    granted as is practicable.

 11-8          (e)  At the hearing, the commission shall affirm, modify, or

 11-9    set aside the emergency authorization.  Any hearing on an emergency

11-10    authorization shall be conducted in accordance with Chapter 2001,

11-11    Government Code, and rules of the commission.  Any set of

11-12    commission rules concerning a hearing or an emergency authorization

11-13    must include provisions for the presentation of evidence by the

11-14    applicant under oath, the presentation of rebuttal evidence, and

11-15    the cross-examination of witnesses.

11-16          (f)  If an imminent threat to the public health, safety, and

11-17    welfare or the environment exists which requires emergency action

11-18    before the commission can take action as provided by Subsections

11-19    (a) through (c) of this section and there are no feasible

11-20    alternatives, the executive director may grant an emergency

11-21    authorization.  If the executive director issues an emergency

11-22    authorization under this subsection, the commission shall hold a

11-23    hearing as provided for in Subsection (d) of this section as soon

11-24    as practicable but in no event later than 10 days after issuance of

11-25    the authorization to affirm, modify, or set aside the

11-26    authorization.  The requirements of Subsection (b) of this section

11-27    shall be satisfied by the applicant on or before such hearing date.

11-28          (g)  The requirements of Section 11.132 of this code relating

11-29    to the time for notice, newspaper notice, and method of giving a

 12-1    person notice do not apply to a hearing held on an application for

 12-2    an emergency authorization under this section, but such general

 12-3    notice of the hearing shall be given as the commission, under

 12-4    Subsections (c) and (e) of this section, considers practicable

 12-5    under the circumstances.

 12-6          (h)  The commission may grant an emergency authorization

 12-7    under this section for the temporary transfer and use of all or

 12-8    part of a surface water right for other than domestic or municipal

 12-9    use to a retail or wholesale water supplier for domestic or

12-10    municipal use.  In addition to the requirements contained in

12-11    Subsection (b) of this section, the commission may direct that the

12-12    applicant will timely pay the amounts for which the applicant may

12-13    be potentially liable under this subsection and will fully

12-14    indemnify and hold harmless the state, the executive director, and

12-15    the commission from any and all liability for the authorization

12-16    sought.  The commission may order bond or other surety in a form

12-17    acceptable to the commission as a condition for such emergency

12-18    authorization.

12-19          (i)  The person granted an emergency authorization under

12-20    Subsection (h) of this section is liable to the owner from whom the

12-21    use is transferred for the fair market value of the water

12-22    transferred as well as for any damages proximately caused by the

12-23    transfer of use.  If, within 60 days of the termination of the

12-24    authorization, the parties do not agree on the amount due, or if

12-25    full payment is not made, either party may file a complaint with

12-26    the commission to determine the amount due.  The commission shall

12-27    adopt rules establishing a dispute resolution procedure for a

12-28    complaint filed under this subsection.  After exhausting all

12-29    administrative remedies under this subsection, an aggrieved party

 13-1    may file suit to recover or determine the amount due in a district

 13-2    court in the county where the diversion point or points of the

 13-3    surface water right which use is being transferred is located.  The

 13-4    prevailing party in a suit filed under this subsection is entitled

 13-5    to recover court costs and reasonable attorney's fees.

 13-6          (j)  [An emergency permit may be granted for a period of not

 13-7    more than 30 days, and no extension or additional emergency permit

 13-8    may be granted at the expiration of the original permit.]

 13-9          [(c)  An emergency permit may be granted under this section

13-10    without the necessity to comply with statutory and other procedures

13-11    required for granting other permits issued by the commission.]

13-12          [(d)]  The commission may prescribe rules and adopt fees

13-13    which are necessary to carry out the provisions of this section.

13-14          (k) [(e)]  An emergency authorization [permit] does not vest

13-15    in the grantee [permittee] any right to the diversion, impoundment,

13-16    or [and] use of water and shall expire and be cancelled in

13-17    accordance with its terms.

13-18          SECTION 1.05.  Subsection (c), Section 12.052, Water Code, is

13-19    amended to read as follows:

13-20          (c)  If the owner of a dam that is required to be

13-21    constructed, reconstructed, repaired, or removed in order to comply

13-22    with the rules and orders promulgated under Subsection (a) of this

13-23    section wilfully fails or refuses to comply within the 30-day

13-24    period following the date of the commission's order to do so or if

13-25    a person wilfully fails to comply with any rule or other order

13-26    issued by the commission under this section within the 30-day

13-27    period following the effective date of the order, he is liable to a

13-28    penalty of not more than $25,000 [$1,000] a day for each day he

13-29    continues to violate this section.  The state may recover the

 14-1    penalty by suit brought for that purpose in the district court of

 14-2    Travis County.

 14-3          SECTION 1.06.  Subchapter C, Chapter 12, Water Code, is

 14-4    amended by adding Sections 12.053 and 12.054 to read as follows:

 14-5          Sec. 12.053.  ADMINISTRATIVE PENALTY.  (a)  If a person

 14-6    violates a rule or order adopted under Section 12.052 of this code,

 14-7    the commission may assess an administrative penalty against that

 14-8    person as provided by this section.

 14-9          (b)  The penalty may be in an amount not to exceed $25,000

14-10    for each day the person is in violation of the rule or order.  Each

14-11    day a violation continues may be considered a separate violation

14-12    for purposes of penalty assessment.

14-13          (c)  In determining the amount of the penalty, the commission

14-14    shall consider:

14-15                (1)  the nature, circumstances, extent, duration, and

14-16    gravity of the prohibited acts, with special emphasis on the hazard

14-17    or potential hazard created to the health, safety, or welfare of

14-18    the public;

14-19                (2)  with respect to the alleged violator:

14-20                      (A)  the history and extent of previous

14-21    violations;

14-22                      (B)  the degree of culpability, including whether

14-23    the violation was attributable to mechanical or electrical failures

14-24    and whether the violation could have been reasonably anticipated

14-25    and avoided;

14-26                      (C)  demonstrated good faith, including actions

14-27    taken by the alleged violator to rectify the cause of the violation

14-28    and to compensate affected persons;

14-29                      (D)  any economic benefit gained through the

 15-1    violation; and

 15-2                      (E)  the amount necessary to deter future

 15-3    violations; and

 15-4                (3)  any other matters that justice may require.

 15-5          (d)  If, after examination of a possible violation and the

 15-6    facts surrounding that possible violation, the executive director

 15-7    concludes that a violation has occurred, the executive director may

 15-8    issue a preliminary report stating the facts on which that

 15-9    conclusion was based, recommending that an administrative penalty

15-10    under this section be imposed on the person charged, and

15-11    recommending the amount of the penalty.  The executive director

15-12    shall base the recommended amount of the proposed penalty on the

15-13    factors provided by Subsection (c) of this section and shall

15-14    analyze each factor for the benefit of the commission.

15-15          (e)  Not later than the 10th day after the date on which the

15-16    report is issued, the executive director shall give written notice

15-17    of the report to the person charged with the violation.  The notice

15-18    shall include a brief summary of the charges, a statement of the

15-19    amount of the penalty recommended, and a statement of the right of

15-20    the person charged to a hearing on the occurrence of the violation,

15-21    the amount of the penalty, or both the occurrence of the violation

15-22    and the amount of the penalty.

15-23          (f)  Not later than the 20th day after the date on which

15-24    notice is received, the person charged may either give to the

15-25    commission written consent to the executive director's report,

15-26    including the recommended penalty, or make a written request for a

15-27    hearing.

15-28          (g)  If the person charged with the violation consents to the

15-29    penalty recommended by the executive director or fails to timely

 16-1    respond to the notice, the commission by order shall either assess

 16-2    the penalty or order a hearing to be held on the findings and

 16-3    recommendations in the executive director's report.  If the

 16-4    commission assesses the penalty recommended by the report, the

 16-5    commission shall give written notice of its decision to the person

 16-6    charged.

 16-7          (h)  If the person charged requests or the commission orders

 16-8    a hearing, the commission shall call a hearing and give notice of

 16-9    the hearing.  As a result of the hearing, the commission by order

16-10    either may find that a violation has occurred and may assess a

16-11    penalty, may find that a violation has occurred but that no penalty

16-12    should be assessed, or may find that no violation has occurred.

16-13    All proceedings under this subsection are subject to Chapter 2001,

16-14    Government Code.  In making any penalty decision, the commission

16-15    shall analyze each of the factors provided by Subsection (c) of

16-16    this section.

16-17          (i)  The commission shall give notice of its decision to the

16-18    person charged, and if the commission finds that a violation has

16-19    occurred and assesses a penalty, the commission shall give written

16-20    notice to the person charged of its findings, of the amount of the

16-21    penalty, and of the person's right to judicial review of the

16-22    commission's order.  If the commission is required to give notice

16-23    of a penalty under this subsection or Subsection (g) of this

16-24    section, the commission shall file notice of its decision in the

16-25    Texas Register not later than the 10th day after the date on which

16-26    the decision is adopted.

16-27          (j)  Within the 30-day period immediately following the day

16-28    on which the commission's order is final, as provided by Subchapter

16-29    F, Chapter 2001, Government Code, the person charged with the

 17-1    penalty shall:

 17-2                (1)  pay the penalty in full; or

 17-3                (2)  pay the amount of the penalty and file a petition

 17-4    for judicial review contesting the occurrence of the violation, the

 17-5    amount of the penalty, or both the occurrence of the violation and

 17-6    the amount of the penalty; or

 17-7                (3)  without paying the amount of the penalty, file a

 17-8    petition for judicial review contesting the occurrence of the

 17-9    violation, the amount of the penalty, or both the occurrence of the

17-10    violation and the amount of the penalty.

17-11          (k)  Within the 30-day period, a person who acts under

17-12    Subsection (j)(3) of this section may:

17-13                (1)  stay enforcement of the penalty by:

17-14                      (A)  paying the amount of the penalty to the

17-15    court for placement in an escrow account; or

17-16                      (B)  giving to the court a supersedeas bond that

17-17    is approved by the court for the amount of the penalty and that is

17-18    effective until all judicial review of the commission's order is

17-19    final; or

17-20                (2)  request the court to stay enforcement of the

17-21    penalty by:

17-22                      (A)  filing with the court a sworn affidavit of

17-23    the person stating that the person is financially unable to pay the

17-24    amount of the penalty and is financially unable to give the

17-25    supersedeas bond; and

17-26                      (B)  giving a copy of the affidavit to the

17-27    commission by certified mail.

17-28          (l)  If the commission receives a copy of an affidavit under

17-29    Subsection (k)(2) of this section, it may file with the court

 18-1    within five days after the date the copy is received a contest to

 18-2    the affidavit.  The court shall hold a hearing on the facts alleged

 18-3    in the affidavit as soon as practicable and shall stay the

 18-4    enforcement of the penalty on finding that the alleged facts are

 18-5    true.  The person who files an affidavit has the burden of proving

 18-6    that the person is financially unable to pay the amount of the

 18-7    penalty and to give a supersedeas bond.

 18-8          (m)  If the person does not pay the amount of the penalty and

 18-9    the enforcement of the penalty is not stayed, the commission may

18-10    refer the matter to the attorney general for collection of the

18-11    amount of the penalty.

18-12          (n)  Judicial review of the order or decision of the

18-13    commission assessing the penalty shall be under the substantial

18-14    evidence rule and shall be instituted by filing a petition with a

18-15    district court in Travis County, as provided by Subchapter G,

18-16    Chapter 2001, Government Code.

18-17          (o)  A penalty collected under this section shall be

18-18    deposited in the state treasury to the credit of the general

18-19    revenue fund.

18-20          (p)  Notwithstanding any other provision to the contrary, the

18-21    commission may compromise, modify, or remit, with or without

18-22    condition, any penalty imposed under this section.

18-23          (q)  Payment of an administrative penalty under this section

18-24    shall be full and complete satisfaction of the violation for which

18-25    the administrative penalty is assessed and shall preclude any other

18-26    civil or criminal penalty for the same violation.

18-27          Sec. 12.054.  PRIVATE CIVIL REMEDY.  Nothing in this chapter

18-28    affects the right of any private corporation or individual to

18-29    pursue any available common-law remedy to enforce a right or to

 19-1    prevent or seek redress or compensation for the violation of a

 19-2    right or otherwise redress an injury.

 19-3          SECTION 1.07.  Section 16.236, Water Code, is amended to read

 19-4    as follows:

 19-5          Sec. 16.236.  CONSTRUCTION OF LEVEE WITHOUT APPROVAL OF

 19-6    PLANS; LEVEE SAFETY.  (a)  No person may construct, attempt to

 19-7    construct, cause to be constructed, maintain, or cause to be

 19-8    maintained any levee or other such improvement on, along, or near

 19-9    any stream of this state that is subject to floods, freshets, or

19-10    overflows so as to control, regulate, or otherwise change the

19-11    floodwater of the stream without first obtaining approval of the

19-12    plans by the commission.

19-13          (b)  The commission shall make and enforce rules and orders

19-14    and shall perform all other acts necessary to provide for the safe

19-15    construction, maintenance, repair, and removal of levees located in

19-16    this state.

19-17          (c)  Rules and orders of the commission shall be adopted or

19-18    issued only after proper notice and hearing as provided in the

19-19    rules of the commission.

19-20          (d)  If the owner of a levee that is required to be

19-21    constructed, reconstructed, repaired, or removed to comply with the

19-22    rules and orders promulgated under this section wilfully fails or

19-23    refuses to comply within the 30-day period following the date of an

19-24    order of the commission requiring such action or compliance or if a

19-25    person wilfully fails to comply with any rule or order issued by

19-26    the commission under this section within the 30-day period

19-27    following the effective date of the order, the person is liable for

19-28    a penalty of not more than $25,000 a day for each day the person

19-29    continues to violate this section.  The state may recover the

 20-1    penalty by suit brought for that purpose in a district court of

 20-2    Travis County.

 20-3          (e)  If the commission determines that the existing condition

 20-4    of a levee is creating or will cause extensive or severe property

 20-5    damage or economic loss to others or is posing an immediate and

 20-6    serious threat to human life or health and that other procedures

 20-7    available to the commission to remedy or prevent such property

 20-8    damage or economic loss will result in unreasonable delay, the

 20-9    commission may issue an emergency order, either mandatory or

20-10    prohibitory in nature, directing the owner of the levee to repair,

20-11    modify, maintain, dewater, or remove the levee which the commission

20-12    determines is unsafe.  The emergency order may be issued without

20-13    notice to the levee owner or with notice the commission considers

20-14    practicable under the circumstances.  The notice does not have to

20-15    comply with Chapter 2001, Government Code.

20-16          (f)  If the commission issues an emergency order under

20-17    authority of this section without notice to the levee owner, the

20-18    commission shall fix a time and place for a hearing, to be held as

20-19    soon as practicable, to affirm, modify, or set aside the emergency

20-20    order.  The notice does not have to comply with Chapter 2001,

20-21    Government Code.  If the nature of the commission's action requires

20-22    further proceedings, those proceedings shall be conducted, as

20-23    appropriate, under Chapter 2001, Government Code.

20-24          (g)  Nothing in this section or in rules or orders adopted by

20-25    the commission shall be construed to relieve an owner or operator

20-26    of a levee of the legal duties, obligations, or liabilities

20-27    incident to ownership or operation.

20-28          (h)  Any person who violates any provision of Subsection (a)

20-29    of this section is guilty of a Class C misdemeanor [and upon

 21-1    conviction is punishable by a fine of not more than $100].  A

 21-2    separate offense is committed each day a structure constructed in

 21-3    violation of this section is maintained.

 21-4          (i)  Subsection (a) of this [(c)  At the request of the

 21-5    executive director, the attorney general shall file suit in a

 21-6    district court of Travis County to enjoin any violation or

 21-7    threatened violation of this section.  In the suit, the attorney

 21-8    general may seek to have the illegal levee or other improvement

 21-9    removed and the preexisting conditions restored and may also

21-10    collect civil penalties of up to $100 a day for each day a

21-11    violation occurs.]

21-12          [(d)  This] section does not apply to:

21-13                (1)  dams permitted by the commission or recognized as

21-14    valid by final decree in any proceeding begun under Subchapter G,

21-15    Chapter 11, of this code;

21-16                (2)  dams authorized by Section 11.142 of this code;

21-17                (3)  a levee or other improvement within the corporate

21-18    limits of a city or town provided:  (a) plans for the construction

21-19    or maintenance or both must be approved by the city or town as a

21-20    condition precedent to starting the project and (b) the city or

21-21    town requires that such plans be in substantial compliance with

21-22    rules and standards adopted by the commission; or

21-23                (4)  a levee or other improvement within the boundaries

21-24    of any political subdivision which has qualified for the National

21-25    Flood Insurance Program as authorized by the National Flood

21-26    Insurance Act of 1968 (Title 42, U.S.C., Sections 4001-4127)

21-27    provided:  (a) plans for the construction or maintenance or both

21-28    must be approved by the political subdivision which is

21-29    participating in the national flood insurance program as a

 22-1    condition precedent to starting the project and (b) the political

 22-2    subdivision requires that such plans be in substantial compliance

 22-3    with rules and standards adopted by the commission;

 22-4                (5)  projects implementing soil and water conservation

 22-5    practices set forth in a conservation plan with a landowner or

 22-6    operator and approved by the governing board of a soil and water

 22-7    conservation district organized under the State Soil Conservation

 22-8    Law, as amended (Article 165a-4, Vernon's Texas Civil Statutes),

 22-9    provided that the governing board finds the practices do not

22-10    significantly affect stream flooding conditions on, along, or near

22-11    a state stream.

22-12          (j) [(e)]  On projects located within the corporate limits of

22-13    a city or town or within the boundaries of any political

22-14    subdivision which are exempt from the provisions of Subsection (a)

22-15    of this section by Subdivision (3) or (4) of Subsection (i) of this

22-16    section [(d) above], any person whose property is located outside

22-17    of the corporate limits of such city or town or of the boundaries

22-18    of such a political subdivision and whose property is affected or

22-19    potentially affected by the effect of the project on the

22-20    floodwaters of the stream may appeal the decision of such political

22-21    subdivision.  The appeal shall be in writing and shall specify the

22-22    grounds therefor and a copy shall be sent by certified mail to the

22-23    project applicant and to the city or town or such political

22-24    subdivision.  The timely filing of such an appeal with the

22-25    executive director suspends the decision of the city or town or

22-26    political subdivision until a final decision is rendered by the

22-27    commission.  The executive director shall review the complaint and

22-28    investigate the facts surrounding the nature of the complaint.  If

22-29    the executive director finds that the complaint is frivolous or

 23-1    nonmeritorious or made solely for purposes of harassment or delay,

 23-2    then he shall dismiss the appeal.  Otherwise, the executive

 23-3    director shall refer the appeal to the commission which shall after

 23-4    due notice hold a hearing to determine whether the project should

 23-5    be approved using the standards established by the commission and

 23-6    shall hear such appeal de novo under the procedural rules

 23-7    established by the commission for other reclamation projects.

 23-8          SECTION 1.08.  Subchapter G, Chapter 16, Water Code, is

 23-9    amended by adding Sections 16.237 and 16.238 to read as follows:

23-10          Sec. 16.237.  ADMINISTRATIVE PENALTY.  (a)  If a person

23-11    violates a commission rule or order adopted under Section 16.236 of

23-12    this code, the commission may assess an administrative penalty

23-13    against that person as provided by this section.

23-14          (b)  The penalty may be in an amount not to exceed $25,000

23-15    for each day the person is in violation of the rule or order.  Each

23-16    day a violation continues may be considered a separate violation

23-17    for purposes of penalty assessment.

23-18          (c)  In determining the amount of the penalty, the commission

23-19    shall consider:

23-20                (1)  the nature, circumstances, extent, duration, and

23-21    gravity of the prohibited acts, with special emphasis on the hazard

23-22    or potential hazard created to the health, safety, or welfare of

23-23    the public;

23-24                (2)  with respect to the alleged violator:

23-25                      (A)  the history and extent of previous

23-26    violations;

23-27                      (B)  the degree of culpability, including whether

23-28    the violation was attributable to mechanical or electrical failures

23-29    and whether the violation could have been reasonably anticipated

 24-1    and avoided;

 24-2                      (C)  demonstrated good faith, including actions

 24-3    taken by the alleged violator to rectify the cause of the violation

 24-4    and to compensate affected persons;

 24-5                      (D)  any economic benefit gained through the

 24-6    violation; and

 24-7                      (E)  the amount necessary to deter future

 24-8    violations; and

 24-9                (3)  any other matters that justice may require.

24-10          (d)  If, after examination of a possible violation and the

24-11    facts surrounding that possible violation, the executive director

24-12    concludes that a violation has occurred, the executive director may

24-13    issue a preliminary report stating the facts on which that

24-14    conclusion was based, recommending that an administrative penalty

24-15    under this section be imposed on the person charged, and

24-16    recommending the amount of the penalty.  The executive director

24-17    shall base the recommended amount of the proposed penalty on the

24-18    factors provided by Subsection (c) of this section and shall

24-19    analyze each factor for the benefit of the commission.

24-20          (e)  Not later than the 10th day after the date on which the

24-21    report is issued, the executive director shall give written notice

24-22    of the report to the person charged with the violation.  The notice

24-23    shall include a brief summary of the charges, a statement of the

24-24    amount of the penalty recommended, and a statement of the right of

24-25    the person charged to a hearing on the occurrence of the violation,

24-26    the amount of the penalty, or both the occurrence of the violation

24-27    and the amount of the penalty.

24-28          (f)  Not later than the 20th day after the date on which

24-29    notice is received, the person charged may either give to the

 25-1    commission written consent to the executive director's report,

 25-2    including the recommended penalty, or make a written request for a

 25-3    hearing.

 25-4          (g)  If the person charged with the violation consents to the

 25-5    penalty recommended by the executive director or fails to timely

 25-6    respond to the notice, the commission by order shall either assess

 25-7    that penalty or order a hearing to be held on the findings and

 25-8    recommendations in the executive director's report.  If the

 25-9    commission assesses the penalty recommended by the report, the

25-10    commission shall give written notice of its decision to the person

25-11    charged.

25-12          (h)  If the person charged requests or the commission orders

25-13    a hearing, the commission shall call a hearing and give notice of

25-14    the hearing.  As a result of the hearing, the commission by order

25-15    either may find that a violation has occurred and may assess a

25-16    penalty, may find that a violation has occurred but that no penalty

25-17    should be assessed, or may find that no violation has occurred.

25-18    All proceedings under this subsection are subject to Chapter 2001,

25-19    Government Code.  In making any penalty decision, the commission

25-20    shall analyze each of the factors provided by Subsection (c) of

25-21    this section.

25-22          (i)  The commission shall give notice of its decision to the

25-23    person charged, and if the commission finds that a violation has

25-24    occurred and assesses an administrative penalty, the commission

25-25    shall give written notice to the person charged of its findings, of

25-26    the amount of the penalty, and of the person's right to judicial

25-27    review of the commission's order.  If the commission is required to

25-28    give notice of a penalty under this subsection or Subsection (g) of

25-29    this section, the commission shall file notice of its decision in

 26-1    the Texas Register not later than the 10th day after the date on

 26-2    which the decision is adopted.

 26-3          (j)  Within the 30-day period immediately following the day

 26-4    on which the commission's order is final, as provided by Subchapter

 26-5    F, Chapter 2001, Government Code, the person charged with the

 26-6    penalty shall:

 26-7                (1)  pay the penalty in full; or

 26-8                (2)  pay the amount of the penalty and file a petition

 26-9    for judicial review contesting the occurrence of the violation, the

26-10    amount of the penalty, or both the occurrence of the violation and

26-11    the amount of the penalty; or

26-12                (3)  without paying the amount of the penalty, file a

26-13    petition for judicial review contesting the occurrence of the

26-14    violation, the amount of the penalty, or both the occurrence of the

26-15    violation and the amount of the penalty.

26-16          (k)  Within the 30-day period, a person who acts under

26-17    Subsection (j)(3) of this section may:

26-18                (1)  stay enforcement of the penalty by:

26-19                      (A)  paying the amount of the penalty to the

26-20    court for placement in an escrow account; or

26-21                      (B)  giving to the court a supersedeas bond that

26-22    is approved by the court for the amount of the penalty and that is

26-23    effective until all judicial review of the commission's order is

26-24    final; or

26-25                (2)  request the court to stay enforcement of the

26-26    penalty by:

26-27                      (A)  filing with the court a sworn affidavit of

26-28    the person stating that the person is financially unable to pay the

26-29    amount of the penalty and is financially unable to give the

 27-1    supersedeas bond; and

 27-2                      (B)  giving a copy of the affidavit to the

 27-3    commission by certified mail.

 27-4          (l)  If the commission receives a copy of an affidavit under

 27-5    Subsection (k)(2) of this section, it may file with the court

 27-6    within five days after the date the copy is received a contest to

 27-7    the affidavit.  The court shall hold a hearing on the facts alleged

 27-8    in the affidavit as soon as practicable and shall stay the

 27-9    enforcement of the penalty on finding that the alleged facts are

27-10    true.  The person who files an affidavit has the burden of proving

27-11    that the person is financially unable to pay the amount of the

27-12    penalty and to give a supersedeas bond.

27-13          (m)  If the person does not pay the amount of the penalty and

27-14    the enforcement of the penalty is not stayed, the commission may

27-15    refer the matter to the attorney general for collection of the

27-16    amount of the penalty.

27-17          (n)  Judicial review of the order or decision of the

27-18    commission assessing the penalty shall be under the substantial

27-19    evidence rule and shall be instituted by filing a petition with a

27-20    district court in Travis County, as provided by Subchapter G,

27-21    Chapter 2001, Government Code.

27-22          (o)  A penalty collected under this section shall be

27-23    deposited in the state treasury to the credit of the general

27-24    revenue fund.

27-25          (p)  Notwithstanding any other provision to the contrary, the

27-26    commission may compromise, modify, or remit, with or without

27-27    condition, any penalty imposed under this section.

27-28          (q)  Payment of an administrative penalty under this section

27-29    shall be full and complete satisfaction of the violation for which

 28-1    the administrative penalty is assessed and shall preclude any other

 28-2    civil or criminal penalty for the same violation.

 28-3          Sec. 16.238.  PRIVATE CIVIL REMEDY.  Nothing in this chapter

 28-4    affects the right of any private corporation or individual to

 28-5    pursue any available common-law remedy to enforce a right or to

 28-6    prevent or seek redress or compensation for the violation of a

 28-7    right or otherwise redress an injury.

 28-8          ARTICLE 2.  WATER MANAGEMENT, MARKETING, AND TRANSFERS

 28-9          SECTION 2.01.  Section 791.026, Government Code, is amended

28-10    to read as follows:

28-11          Sec. 791.026.  CONTRACTS FOR WATER SUPPLY AND WASTEWATER

28-12    TREATMENT FACILITIES.  (a)  A municipality, district, or river

28-13    authority of this state may contract with another municipality,

28-14    district, or river authority of this state to obtain or provide

28-15    part or all of:

28-16                (1)  water supply or wastewater treatment facilities;

28-17    or

28-18                (2)  a lease or operation of water supply facilities or

28-19    wastewater treatment facilities.

28-20          (b)  The contract may provide that the municipality,

28-21    district, or river authority obtaining one of the services may not

28-22    obtain those services from a source other than a contracting party,

28-23    except as provided by the contract.

28-24          (c)  If a contract includes a term described by Subsection

28-25    (b), payments made under the contract are the paying party's

28-26    operating expenses for its water supply system, wastewater

28-27    treatment facilities, or both.

28-28          (d)  The contract may:

28-29                (1)  contain terms and extend for any period on which

 29-1    the parties agree; [and]

 29-2                (2)  require the purchaser to develop alternative or

 29-3    replacement supplies prior to the expiration date of the contract

 29-4    and may provide for enforcement of such terms by court order; and

 29-5                (3)  provide that it will continue in effect until

 29-6    bonds specified by the contract and any refunding bonds issued to

 29-7    pay those bonds are paid.

 29-8          (e)  Where a contract sets forth explicit expiration

 29-9    provisions, no continuation of the service obligation will be

29-10    implied.

29-11          (f)  Tax revenue may not be pledged to the payment of amounts

29-12    agreed to be paid under the contract.

29-13          (g) [(f)]  The powers granted by this section prevail over a

29-14    limitation contained in another law.

29-15          SECTION 2.02.  Section 11.002, Water Code, is amended by

29-16    adding Subdivisions (9) and (10) to read as follows:

29-17                (9)  "Developed water" means:

29-18                      (A)  groundwater that is in a watercourse or

29-19    stream, that would not be in the watercourse or stream but for the

29-20    efforts of the developer, and that is intended for subsequent

29-21    diversion and use by the developer; and

29-22                      (B)  surface water obtained through an approved

29-23    interbasin transfer of water that is in a watercourse or stream,

29-24    that would not be in the watercourse or stream but for the efforts

29-25    of the developer, and that is intended for subsequent diversion and

29-26    use by the developer.

29-27                (10)  "Surplus water" means water in excess of the

29-28    initial or continued beneficial use of the appropriator and not

29-29    consumed or used beneficially for the purpose authorized by law.

 30-1          SECTION 2.03.  Subsection (e), Section 11.023, Water Code, is

 30-2    amended to read as follows:

 30-3          (e)  The amount of water appropriated for each purpose

 30-4    mentioned in this section shall be specifically appropriated for

 30-5    that purpose, subject to the preferences prescribed in Section

 30-6    11.024 of this code.  The commission may authorize appropriation of

 30-7    a single amount or volume of water for more than one purpose of

 30-8    use.  In the event that a single amount or volume of water is

 30-9    appropriated for more than one purpose of use, the total amount of

30-10    water actually diverted for all of the authorized purposes may not

30-11    exceed the total amount of water appropriated.

30-12          SECTION 2.04.  Section 11.036, Water Code, is amended to read

30-13    as follows:

30-14          Sec. 11.036.  CONSERVED OR STORED WATER:  SUPPLY CONTRACT.

30-15    (a)  A person, association of persons, corporation, or water

30-16    improvement or irrigation district having in possession and control

30-17    any storm water, floodwater, or rainwater that is conserved or

30-18    stored as authorized by this chapter may contract to supply the

30-19    water to any person, association of persons, corporation, or water

30-20    improvement or irrigation district having the right to acquire use

30-21    of the water.

30-22          (b)  The price and terms of the contract shall be just and

30-23    reasonable and without discrimination, and the contract is subject

30-24    to the same revision and control as provided in this code for other

30-25    water rates and charges.  If the contract sets forth explicit

30-26    expiration provisions, no continuation of the service obligation

30-27    will be implied.

30-28          (c)  The terms of a contract may expressly provide that the

30-29    person using the stored or conserved water is required to develop

 31-1    alternative or replacement supplies prior to the expiration of the

 31-2    contract and may further provide for enforcement of such terms by

 31-3    court order.

 31-4          (d)  If any person uses the stored or conserved water without

 31-5    first entering into a contract with the party that conserved or

 31-6    stored it, the user shall pay for the use at a rate determined by

 31-7    the commission to be just and reasonable, subject to court review

 31-8    as in other cases.

 31-9          SECTION 2.05.  Subsection (a), Section 11.041, Water Code, is

31-10    amended to read as follows:

31-11          (a)  Any person entitled to receive or use water from any

31-12    canal, ditch, flume, lateral, dam, reservoir, or lake or from any

31-13    conserved or stored supply may present to the commission a written

31-14    petition showing:

31-15                (1)  that he is entitled to receive or use the water;

31-16                (2)  that he is willing to comply with all reasonable

31-17    contractual provisions;

31-18                (3)  that he is willing and able to pay a just and

31-19    reasonable price for the water;

31-20                (4) [(3)]  that the party owning or controlling the

31-21    water supply has water not contracted to others and available for

31-22    the petitioner's use; and

31-23                (5) [(4)]  that the party owning or controlling the

31-24    water supply fails or refuses to supply the available water to the

31-25    petitioner, or that the price or rental demanded for the available

31-26    water is not reasonable and just or is discriminatory.

31-27          SECTION 2.06.  Section 11.042, Water Code, is amended to read

31-28    as follows:

31-29          Sec. 11.042.  DELIVERING WATER DOWN BANKS AND BEDS.

 32-1    (a)  Under rules prescribed by the commission, a person,

 32-2    association of persons, corporation, or water improvement or

 32-3    irrigation district supplying stored or conserved water under

 32-4    contract as provided in this chapter may use the bank and bed of

 32-5    any flowing natural stream in the state to convey the water from

 32-6    the place of storage to the place of use or to the diversion plant

 32-7    of the appropriator.  The commission shall prescribe rules for this

 32-8    purpose.

 32-9          (b)  A person who wishes to convey developed water in a

32-10    watercourse or stream must obtain the prior approval of the

32-11    commission through a bed  and banks authorization.  Such

32-12    authorization shall ensure that an unlawful appropriation of water

32-13    does not occur by allowing only the amount of developed water put

32-14    into the watercourse or stream to be diverted, less carriage

32-15    losses.  Developed water discharged into a watercourse or stream

32-16    must also meet all applicable water quality standards, and the

32-17    water and its discharge and conveyance including diversion rates

32-18    and location point may not otherwise cause adverse environmental

32-19    impacts.  Authorizations under this section and water quality

32-20    authorizations may be approved in a consolidated permit proceeding.

32-21          (c)  A person who has discharged groundwater into a

32-22    watercourse or stream and who subsequently wishes to divert and use

32-23    such water must first obtain authorization for the diversion and

32-24    use from the commission subject to special conditions as necessary

32-25    to protect existing water rights, instream uses, and freshwater

32-26    inflows to bays and estuaries.

32-27          SECTION 2.07.  Section 11.046, Water Code, is amended to read

32-28    as follows:

32-29          Sec. 11.046.  RETURN UNUSED WATER.  (a)  A person who takes

 33-1    or diverts water from a watercourse or [running] stream for the

 33-2    purposes authorized by this code shall conduct surplus water back

 33-3    to the watercourse or stream from which it was taken if the water

 33-4    can be returned by gravity flow or mechanical means and it is

 33-5    reasonably practicable to do so.

 33-6          (b)  In granting an application for a water right, the

 33-7    commission may include conditions in the water right providing for

 33-8    the return of surplus water, in a specific amount or percentage of

 33-9    water diverted, and the return point on the watercourse or stream

33-10    as necessary to protect senior downstream water rights or provide

33-11    flows for instream uses or bays and estuaries.

33-12          (c)  Except as specifically provided otherwise in the water

33-13    right, water appropriated under a water right may, prior to its

33-14    release into a watercourse or stream, be beneficially used and

33-15    reused by the water right holder for the purposes and locations of

33-16    use provided in the water right.  Once water has been diverted

33-17    under a water right and then returned to a watercourse or stream,

33-18    however, it is considered surplus water and therefore subject to

33-19    appropriation by others unless expressly provided otherwise in the

33-20    water right.

33-21          SECTION 2.08.  Section 11.085, Water Code, is amended to read

33-22    as follows:

33-23          Sec. 11.085.  INTERBASIN [INTERWATERSHED] TRANSFERS.  (a)  No

33-24    person may take or divert any state [of the] water from a river

33-25    basin [of the ordinary flow, underflow, or storm flow of any

33-26    stream, watercourse, or watershed] in this state and transfer such

33-27    water to [into] any other river basin [natural stream, watercourse,

33-28    or watershed to the prejudice of any person or property situated

33-29    within the watershed from which the water is proposed to be taken

 34-1    or diverted.]

 34-2          [(b)  No person may transfer water from one watershed to

 34-3    another] without first applying for and receiving a water right or

 34-4    an amendment to a water right [permit] from the commission [to do

 34-5    so.  Before issuing such a permit, the commission shall hold a

 34-6    hearing to determine the rights that might be affected by the

 34-7    transfer.  The commission shall give notice and hold the hearing in

 34-8    the manner prescribed by its procedural rules].

 34-9          (b)  Prior to taking action on an application for an

34-10    interbasin transfer, at least one public meeting to receive

34-11    comments shall be held in both the basin of origin of the water

34-12    proposed for transfer and the basin receiving water from the

34-13    proposed transfer.  Any person may present relevant information and

34-14    data at the meeting on the criteria which the commission is to

34-15    consider related to the interbasin transfer.

34-16          (c)  In addition to the public meetings required by

34-17    Subsection (b) of this section, the commission shall hold an

34-18    evidentiary hearing, in accordance with commission rules and

34-19    applicable state law, if the application is contested and an

34-20    evidentiary hearing is required.  The commission shall give notice

34-21    and hold the evidentiary hearing in the manner prescribed by its

34-22    procedural rules.

34-23          (d)  Notice of an application for an interbasin transfer

34-24    shall be mailed to the following:

34-25                (1)  all water right holders in the basin of origin;

34-26                (2)  each county judge of a county located in whole or

34-27    in part in the basin of origin; and

34-28                (3)  each mayor of a city with a population of 1,000 or

34-29    more located in whole or in part in the basin of origin.

 35-1          (e)  The applicant shall cause the notice of application for

 35-2    an interbasin transfer to be published once a week for two

 35-3    consecutive weeks in one or more newspapers having general

 35-4    circulation in each county located in whole or in part in the basin

 35-5    of origin.  The published notice may not be smaller than 96.8

 35-6    square centimeters or 15 square inches with the shortest dimension

 35-7    at least 7.6 centimeters or three inches.  The notice of

 35-8    application and public meetings shall be combined in the mailed and

 35-9    published notices.

35-10          (f)  The applicant shall pay the cost of notice required to

35-11    be provided under this section.  The commission by rule may

35-12    establish procedures for payment of those costs.

35-13          (g)  In addition to other requirements of this code relating

35-14    to the review of and action on an application for a new or amended

35-15    water right, the commission shall weigh the effects of the proposed

35-16    transfer on the basin of origin and the receiving basin by

35-17    considering:

35-18                (1)  the need for the water in the basin of origin and

35-19    in the proposed receiving basin based on the period for which the

35-20    water supply is requested, but not more than 50 years, and

35-21    identified in a needs assessment or a regional water management

35-22    plan which addresses the following for each basin:

35-23                      (A)  the availability of feasible and practicable

35-24    alternative supplies to the water proposed for transfer and their

35-25    related economic and environmental impacts as compared to the

35-26    potential economic and environmental impacts of the transfer;

35-27                      (B)  the amount and purposes of use for which

35-28    water is needed;

35-29                      (C)  evidence that reasonable diligence is and

 36-1    will be used to avoid waste, achieve water conservation, and

 36-2    implement drought contingency measures;

 36-3                      (D)  evidence of reasonable diligence to put the

 36-4    water proposed for transfer to beneficial use; and

 36-5                      (E)  the projected economic impact that is

 36-6    reasonably expected to occur if the water proposed for transfer is

 36-7    used in each basin;

 36-8                (2)  the intended use by both basins of the water

 36-9    proposed for transfer against the preferences for use set forth in

36-10    Section 11.024 of this code;

36-11                (3)  the actual impacts of the proposed transfer on

36-12    existing instream uses, water quality, aquatic and riparian

36-13    habitat, and bays and estuaries that must be assessed under

36-14    Sections 11.147, 11.150, and 11.152 of this code in the basin of

36-15    origin and the receiving basin, and if the water sought to be

36-16    transferred is currently authorized to be used under an existing

36-17    water right, such impacts shall only be considered in relation to

36-18    that portion of the water right proposed for transfer and shall be

36-19    based on historical uses of the water right for which amendment is

36-20    sought;

36-21                (4)  proposed mitigation or compensation, if any, to

36-22    the basin of origin by the applicant;

36-23                (5)  the applicant's or intended water user's diligence

36-24    in pursuing feasible and practicable alternative water supplies

36-25    within the receiving basin and the sufficiency of the applicant's

36-26    or intended water user's water conservation efforts; and

36-27                (6)  for an amendment to an existing water right, the

36-28    continued need to use the water for the original purposes that were

36-29    identified as requiring such water under the application for the

 37-1    original water right.

 37-2          (h)  The commission may grant, in whole or in part, an

 37-3    application for an interbasin transfer only to the extent that the

 37-4    detriments to the basin of origin during the proposed transfer

 37-5    period are less than the benefits to the receiving basin during the

 37-6    proposed transfer period.  The commission may grant new or amended

 37-7    water rights under this section with or without specific terms or

 37-8    periods of use and with specific conditions under which a transfer

 37-9    of water may occur.

37-10          (i)  This section does not apply to:

37-11                (1)  a proposed transfer or cumulative transfers of

37-12    less than 5,000 acre-feet of water per annum from the same water

37-13    right; or

37-14                (2)  a request for an emergency transfer of water; or

37-15                (3)  a proposed transfer from a basin to its adjoining

37-16    coastal basin.

37-17          (j)  If the transfer of water is based on a contractual sale

37-18    of water, the new or amended water right authorizing the transfer

37-19    shall contain a condition for a term or period not greater than the

37-20    contract term.

37-21          (k)  The parties to a contract for an interbasin transfer may

37-22    include provisions for compensation and mitigation.

37-23          (l)  For the purposes of this section, a basin is delineated

37-24    as provided in the state water plan in accordance with Section

37-25    16.051 of this code.

37-26          (m) [(c)]  A person who takes or diverts water in violation

37-27    of this section is guilty of a misdemeanor and upon conviction is

37-28    punishable by a fine of not [less than $100 nor] more than $10,000

37-29    [$500] or by confinement in the county jail for not more than six

 38-1    months.

 38-2          (n) [(d)]  A person commits a separate offense each day he

 38-3    continues to take or divert water in violation of this section.

 38-4          SECTION 2.09.  Subsection (a), Section 11.124, Water Code, is

 38-5    amended to read as follows:

 38-6          (a)  An application to appropriate unappropriated state water

 38-7    must:

 38-8                (1)  be in writing and sworn to;

 38-9                (2)  contain the name and post-office address of the

38-10    applicant;

38-11                (3)  identify the source of water supply;

38-12                (4)  state the nature and purposes of the proposed use

38-13    or uses and the amount of water to be used for each purpose;

38-14                (5)  state the location and describe the proposed

38-15    facilities;

38-16                (6)  state the time within which the proposed

38-17    construction is to begin; and

38-18                (7)  state the time required for the application of

38-19    water to the proposed use or uses.

38-20          SECTION 2.10.  Subsection (b), Section 11.135, Water Code, is

38-21    amended to read as follows:

38-22          (b)  The permit shall be in writing and attested by the seal

38-23    of the commission, and it shall contain substantially the following

38-24    information:

38-25                (1)  the name of the person to whom the permit is

38-26    issued;

38-27                (2)  the date the permit is issued;

38-28                (3)  the date the original application was filed;

38-29                (4)  the use or purpose for which the appropriation is

 39-1    to be made;

 39-2                (5)  the amount or volume of water authorized to be

 39-3    appropriated for each purpose; if use of the appropriated water is

 39-4    authorized for multiple purposes, the permit shall contain a

 39-5    special condition limiting the total amount of water that may

 39-6    actually be diverted for all of the purposes to the amount of water

 39-7    appropriated;

 39-8                (6)  a general description of the source of supply from

 39-9    which the appropriation is proposed to be made;

39-10                (7)  the time within which construction or work must

39-11    begin and the time within which it must be completed; and

39-12                (8)  any other information the commission prescribes.

39-13          SECTION 2.11.  Sections 11.176 and 11.177, Water Code, are

39-14    amended to read as follows:

39-15          Sec. 11.176.  HEARING.  (a)  Except as provided by Subsection

39-16    (b) of this section, the [The] commission shall hold a hearing and

39-17    shall give the holder of the permit, certified filing, or

39-18    certificate of adjudication and other interested persons an

39-19    opportunity to be heard and to present evidence on any matter

39-20    pertinent to the questions at issue.

39-21          (b)  A hearing on the cancellation of a water right as

39-22    provided by this chapter is unnecessary if the right to such

39-23    hearing is expressly waived by the affected water right holder.

39-24          (c)  A water right for a term does not vest in the water

39-25    right holder any right to the diversion, impoundment, or use of

39-26    water for longer than the term of the water right and shall expire

39-27    and be cancelled in accordance with its terms without further need

39-28    for notice or hearing.

39-29          Sec. 11.177.  COMMISSION FINDING; ACTION.  (a)  At the

 40-1    conclusion of the hearing, the commission shall cancel the permit,

 40-2    certified filing, or certificate of adjudication in whole or in

 40-3    part to the extent that it finds that:

 40-4                (1)  the water or any portion of the water appropriated

 40-5    under the permit, certified filing, or certificate of adjudication

 40-6    has not been put to an authorized beneficial use during the 10-year

 40-7    period; and

 40-8                (2)  the holder has not used reasonable diligence in

 40-9    applying the water or the unused portion of the water to an

40-10    authorized beneficial use or is otherwise unjustified in the

40-11    nonuse[; and]

40-12                [(3)  the holder has not been justified in the nonuse

40-13    or does not then have a bona fide intention of putting the water or

40-14    the unused portion of the water to an authorized beneficial use

40-15    within a reasonable time after the hearing].

40-16          (b)  In determining what constitutes reasonable diligence or

40-17    a justified nonuse [and a reasonable time] as used in Subsection

40-18    (a)(2) [(a)(3)] of this section, the commission shall give

40-19    consideration to:

40-20                (1)  whether sufficient water is available in the

40-21    source of supply to meet all or part of the appropriation during

40-22    the 10-year period of nonuse;

40-23                (2)  whether the nonuse is justified by the holder's

40-24    participation in the federal Conservation Reserve Program or a

40-25    similar governmental program as provided by Section 11.173(b)(1) of

40-26    this code;

40-27                (3)  whether the water right was obtained to meet

40-28    demonstrated long-term public water supply needs as evidenced by a

40-29    water management plan developed by the holder or consistent with

 41-1    projections of future water needs contained in the state water

 41-2    plan;

 41-3                (4)  whether the holder has complied with an approved

 41-4    water management plan as provided by Section 11.173(b)(2) of this

 41-5    code; or

 41-6                (5)  whether the water right has been deposited into

 41-7    the Texas Water Bank as provided by Section 15.704 of this code

 41-8    [the expenditures made or obligations incurred by the holder in

 41-9    connection with the permit, certified filing, or certificate of

41-10    adjudication;]

41-11                [(2)  the purpose to which the water is to be applied;]

41-12                [(3)  the priority of the purpose;]

41-13                [(4)  the amount of time usually necessary to put water

41-14    to a beneficial use for the same purpose when diligently developed;

41-15    and]

41-16                [(5)  whether at all times during the 10-year period

41-17    there was rainfall adequate to enable the use of all or part of the

41-18    water authorized to be appropriated under the permit, certified

41-19    filing, or certificate of adjudication].

41-20          SECTION 2.12.  Subsection (a), Section 15.704, Water Code, is

41-21    amended to read as follows:

41-22          (a)  A [Up to 50 percent of a] water right may be deposited

41-23    in the water bank for an initial term of up to 10 years, during

41-24    which time the water right is exempt from cancellation by the

41-25    commission under the terms of Subchapter E of Chapter 11 of this

41-26    code.  A water right is exempt from cancellation under this

41-27    subsection only once even if it has been transferred or

41-28    redeposited.

41-29          SECTION 2.13.  All permits approved by the Texas Natural

 42-1    Resource Conservation Commission before the effective date of this

 42-2    Act that allow the multiple use of the appropriation of a specific

 42-3    amount of water and which are no longer subject to appeal are

 42-4    validated in all respects as if they originally had been legally

 42-5    authorized or accomplished.

 42-6            ARTICLE 3.  SURFACE WATER AND GROUNDWATER SUPPLIES

 42-7          SECTION 3.01.  Subsection (b), Section 11.134, Water Code, is

 42-8    amended to read as follows:

 42-9          (b)  The commission shall grant the application only if:

42-10                (1)  the application conforms to the requirements

42-11    prescribed by this chapter and is accompanied by the prescribed

42-12    fee;

42-13                (2)  unappropriated water is available in the source of

42-14    supply;

42-15                (3)  the proposed appropriation:

42-16                      (A)  contemplates the application of water to any

42-17    beneficial use;

42-18                      (B)  does not impair existing water rights or

42-19    vested riparian rights; [and]

42-20                      (C)  is not detrimental to the public welfare;

42-21    and

42-22                      (D)  addresses a water supply need in a manner

42-23    that is consistent with the state water plan or an approved

42-24    regional water management plan for the area in which the proposed

42-25    appropriation is located, unless the commission determines that

42-26    conditions warrant waiver of this requirement; and

42-27                (4)  the applicant has provided evidence that

42-28    reasonable diligence will be used to avoid waste and achieve water

42-29    conservation as defined by Subdivision (8)(B), Section 11.002, of

 43-1    this code.

 43-2          SECTION 3.02.  Subchapter D, Chapter 11, Water Code, is

 43-3    amended by adding Section 11.151 to read as follows:

 43-4          Sec. 11.151.  EFFECTS OF PERMITS ON GROUNDWATER.  In

 43-5    considering an application for a permit to store, take, or divert

 43-6    surface water, the commission may assess the effects, if any, on

 43-7    groundwater.

 43-8          SECTION 3.03.  Section 11.153, Water Code, is amended by

 43-9    amending the section heading and Subsection (d) to read as follows:

43-10          Sec. 11.153.  [PILOT] PROJECTS FOR STORAGE OF APPROPRIATED

43-11    WATER IN AQUIFERS.

43-12          (d)  The commission shall only issue a [A] final order

43-13    granting a permit or amendment to a permit authorizing the storage

43-14    of appropriated water in aquifers for subsequent beneficial use

43-15    where completed pilot projects or historically demonstrated

43-16    projects have been shown to be feasible under the criteria provided

43-17    in Section 11.154(c) and (d)[, other than for the pilot projects

43-18    authorized by this section, may not be issued before June 1, 1999].

43-19          SECTION 3.04.  Subsections (a), (b), (c), and (e), Section

43-20    11.154, Water Code, are amended to read as follows:

43-21          (a)  An application filed with the commission to undertake a

43-22    [pilot] project under Section 11.153 must include:

43-23                (1)  the information required for an application for a

43-24    permit or permit amendment to appropriate state water;

43-25                (2)  all information required for an application for a

43-26    permit for a Class V injection well without requiring a separate

43-27    hearing or notice; and

43-28                (3)  a map or plat showing the injection facility and

43-29    the aquifer in which the water will be stored.

 44-1          (b)  If the application is for a permit or permit amendment

 44-2    to store appropriated water in a groundwater [an underground water]

 44-3    reservoir or a subdivision of a groundwater [an underground water]

 44-4    reservoir, as defined by Chapter 36 [52], that is under the

 44-5    jurisdiction of a groundwater [an underground water] conservation

 44-6    district:

 44-7                (1)  the applicant shall:

 44-8                      (A)  provide a copy of the application to each

 44-9    groundwater [underground water] conservation district that has

44-10    jurisdiction over the reservoir or subdivision;

44-11                      (B)  cooperate with each district [the districts]

44-12    that has [have] jurisdiction over the reservoir or subdivision to

44-13    ensure compliance with the rules of each district;

44-14                      (C)  cooperate with each district that has

44-15    jurisdiction over the reservoir or subdivision to develop rules

44-16    regarding the injection, storage, and withdrawal of appropriated

44-17    water stored in the aquifer; and

44-18                      (D)  comply with the rules governing the

44-19    injection, storage, and [or] withdrawal of appropriated water

44-20    stored in the reservoir or subdivision that are adopted by each [a]

44-21    district that has jurisdiction over the reservoir or subdivision;

44-22    and

44-23                (2)  the commission shall require that any agreement

44-24    the applicant reaches with a district that has jurisdiction over

44-25    the reservoir or subdivision regarding the terms for the injection,

44-26    storage, and withdrawal of appropriated water be included as a

44-27    condition of the permit or permit amendment.

44-28          (c)  On [completion of a pilot project and] receipt of an

44-29    appropriate application for a permit or an amendment to an existing

 45-1    permit from an applicant with a completed pilot or historically

 45-2    demonstrated project, the commission shall evaluate the success of

 45-3    the pilot or historically demonstrated project for purposes of

 45-4    issuing a final order granting a permit or permit amendment

 45-5    authorizing the storage of appropriated water incident to a

 45-6    beneficial use.  The commission shall consider whether:

 45-7                (1)  the introduction of water into the aquifer will

 45-8    alter the physical, chemical, or biological quality of native

 45-9    groundwater to a degree that the introduction would:

45-10                      (A)  render groundwater produced from the aquifer

45-11    harmful or detrimental to people, animals, vegetation, or property;

45-12    or

45-13                      (B)  require treatment of the groundwater to a

45-14    greater extent than the native groundwater requires before being

45-15    applied to that beneficial use;

45-16                (2)  the water stored in the receiving aquifer can be

45-17    successfully harvested from the aquifer for beneficial use; and

45-18                (3)  the permit holder has provided evidence that

45-19    reasonable diligence will be used to protect the water stored in

45-20    the receiving aquifer from unauthorized withdrawals to the extent

45-21    necessary to maximize the permit holder's ability to retrieve and

45-22    beneficially use the stored water without experiencing unreasonable

45-23    loss of appropriated water.

45-24          (e)  A permit to store appropriated water in a groundwater

45-25    [an underground water] reservoir or subdivision, as defined by

45-26    Chapter 36 [52], shall provide as a condition to the permit that

45-27    the permit holder shall:

45-28                (1)  register the permit holder's injection and

45-29    recovery wells with a groundwater [an underground water]

 46-1    conservation district that has jurisdiction over the reservoir or

 46-2    subdivision, if any; and

 46-3                (2)  each calendar month, provide the district, if any,

 46-4    with a written report showing for the previous calendar month:

 46-5                      (A)  the amount of water injected for storage;

 46-6    and

 46-7                      (B)  the amount of water recaptured for use.

 46-8          SECTION 3.05.  Subsection (b), Section 11.155, Water Code, is

 46-9    amended to read as follows:

46-10          (b)  The board shall make other studies, investigations, and

46-11    surveys of the aquifers in the state as it considers necessary to

46-12    determine the occurrence, quantity, quality, and availability of

46-13    other aquifers in which water may be stored and subsequently

46-14    retrieved for beneficial use.  The board shall undertake the

46-15    studies, investigations, and surveys in the following order of

46-16    priority:

46-17                (1)  the aquifers identified in Section 11.153(a);

46-18                (2)  areas designated by the commission as "priority

46-19    groundwater management [critical] areas" under Section 35.008

46-20    [52.053]; and

46-21                (3)  other areas of the state in a priority to be

46-22    determined by the board's ranking of where the greatest need

46-23    exists.

46-24          SECTION 3.06.  Subsection (b), Section 11.173, Water Code, is

46-25    amended to read as follows:

46-26          (b)  A permit, certified filing, or certificate of

46-27    adjudication or a portion of a permit, certified filing, or

46-28    certificate of adjudication is exempt from cancellation under

46-29    Subsection (a) of this section:

 47-1                (1)  to the extent of the owner's participation in the

 47-2    Conservation Reserve Program authorized by the Food Security Act,

 47-3    Pub.L. No. 99-198, Secs. 1231-1236, 99 Stat. 1354, 1509-1514 (1985)

 47-4    or a similar governmental program; or

 47-5                (2)  if any portion of the water authorized to be used

 47-6    pursuant to a permit, certified filing, or certificate of

 47-7    adjudication has been used in accordance with a water management

 47-8    plan approved by the commission or a regional water management plan

 47-9    approved pursuant to Section 16.059 of this code.

47-10          SECTION 3.07.  Subdivision (6), Section 15.001, Water Code,

47-11    is amended to read as follows:

47-12                (6)  "Project" means:

47-13                      (A)  any undertaking or work to conserve, convey,

47-14    and develop surface or subsurface water resources in the state, to

47-15    provide for the maintenance and enhancement of the quality of the

47-16    water of the state, to provide nonstructural and structural flood

47-17    control, drainage, subsidence control, recharge, chloride control,

47-18    and desalinization, and to carry out other purposes defined by

47-19    board rules; [or]

47-20                      (B)  any undertaking or work outside the state to

47-21    provide for the maintenance and enhancement of the quality of water

47-22    by eliminating saline inflow through well pumping and deep well

47-23    injection of brine; or

47-24                      (C)  any undertaking or work by Texas political

47-25    subdivisions to conserve, convey, and develop surface or subsurface

47-26    water resources in areas outside Texas or to provide for the

47-27    maintenance and enhancement of the quality of the water in areas

47-28    adjoining Texas, if such undertaking or work will result in water

47-29    being available for use in or for the benefit of Texas or will

 48-1    maintain and enhance the quality of water in Texas.

 48-2          SECTION 3.08.  Subsection (b), Section 15.002, Water Code, is

 48-3    amended to read as follows:

 48-4          (b)  The legislature finds that the conventional means of

 48-5    financing projects are inadequate to meet current and anticipated

 48-6    needs of the state.  Therefore, it is the further intent of the

 48-7    legislature to provide a means of coordinating the development of

 48-8    projects [throughout the state] through the board and to provide

 48-9    political subdivisions the maximum opportunity to finance projects

48-10    through programs provided by this chapter.  Projects may be in the

48-11    state or outside the state, provided that out-of-state projects

48-12    must be funded through a Texas political subdivision and must

48-13    result in water being available for use in or for the benefit of

48-14    Texas or maintain and enhance the quality of water in Texas.

48-15          SECTION 3.09.  Section 15.401, Water Code, is amended to read

48-16    as follows:

48-17          Sec. 15.401.  PROGRAM CREATION.  The research and planning

48-18    program is created to provide money for research into and planning

48-19    of the proper conservation and development of the state's water

48-20    resources, for regional planning by political subdivisions, for

48-21    facility engineering in economically distressed areas, and for

48-22    flood control planning by political subdivisions.  The program may

48-23    also provide money for research and planning by Texas political

48-24    subdivisions related to the proper conservation and development of

48-25    water resources of areas outside Texas if such research or planning

48-26    will result in water being available for use in or for the benefit

48-27    of Texas or will maintain and enhance the quality of water in

48-28    Texas.

48-29          SECTION 3.10.  Subsection (a), Section 15.404, Water Code, is

 49-1    amended to read as follows:

 49-2          (a)  The board may enter into a contract with any person for

 49-3    research into any matter relating to the conservation and

 49-4    development of the state's water resources or for research by Texas

 49-5    political subdivisions related to the proper conservation and

 49-6    development of water resources of areas outside Texas if such

 49-7    research will result in water being available for use in or for the

 49-8    benefit of Texas or will help maintain and enhance the quality of

 49-9    water in Texas.

49-10          SECTION 3.11.  Subsection (f), Section 15.406, Water Code, is

49-11    amended to read as follows:

49-12          (f)  The board shall adopt rules establishing criteria of

49-13    eligibility for regional facility planning money that considers:

49-14                (1)  the relative need of the political subdivision for

49-15    the money;

49-16                (2)  the legal authority of the political subdivision

49-17    to plan, develop, and operate regional facilities; [and]

49-18                (3)  the effect of regional facility planning by the

49-19    political subdivision on overall regional facility planning,

49-20    development, and operation in the state and within the area in

49-21    which the political subdivision is located; and

49-22                (4)  the degree to which the regional facility planning

49-23    by the political subdivision is consistent with an approved

49-24    regional water management plan for the area in which the political

49-25    subdivision is located.

49-26          SECTION 3.12.  Subchapter F, Chapter 15, Water Code, is

49-27    amended by adding a new Section 15.407 and renumbering existing

49-28    Section 15.407 as Section 15.408 to read as follows:

49-29          Sec. 15.407.  REGIONAL WATER MANAGEMENT PLANNING.  (a)  The

 50-1    board may enter into contracts with political subdivisions to pay

 50-2    from the research and planning fund all or part of the cost of

 50-3    developing or revising comprehensive regional water management

 50-4    plans as defined in Section 16.059 of this code.

 50-5          (b)  A political subdivision or political subdivisions that

 50-6    desire money from the research and planning fund for regional water

 50-7    management planning shall submit a written application to the board

 50-8    in the manner and form required by board rules.

 50-9          (c)  The application shall include:

50-10                (1)  the name of the political subdivision or political

50-11    subdivisions;

50-12                (2)  a citation to the laws under which the political

50-13    subdivision was created and is operating, including specific

50-14    citation of all laws providing authority to develop and implement a

50-15    regional water management plan;

50-16                (3)  the amount requested from the board for regional

50-17    water management planning; and

50-18                (4)  any other relevant information required by the

50-19    board in its rules or specifically requested by the board.

50-20          (d)  After notice and hearing, the board may award the

50-21    applicant all or part of the requested funds that the board

50-22    considers necessary for the political subdivision to carry out

50-23    regional water management planning.

50-24          (e)  If the board grants an application under this section

50-25    and awards funds for regional water management planning, the board

50-26    shall enter into a contract with the political subdivision or

50-27    political subdivisions that includes:

50-28                (1)  a detailed statement of the purpose for which the

50-29    money is to be used;

 51-1                (2)  the total amount of money to be paid by the board

 51-2    from the research and planning fund under the contract; and

 51-3                (3)  any other terms and conditions required by the

 51-4    board's rules or agreed to by the contracting parties.

 51-5          (f)  The board shall adopt rules establishing criteria for

 51-6    eligibility for regional water management planning money that

 51-7    include:

 51-8                (1)  the relative need of the political subdivision for

 51-9    the money;

51-10                (2)  the legal authority of the political subdivision

51-11    to develop and implement a regional water management plan; and

51-12                (3)  the degree to which regional water management

51-13    planning by the political subdivision or political subdivisions

51-14    will address the water supply needs of all communities and public

51-15    water systems in the designated planning area.

51-16          (g)  The board shall require that regional water management

51-17    plans developed or revised under contracts entered into under this

51-18    section be made available to the commission.

51-19          Sec. 15.408.  FACILITY ENGINEERING IN ECONOMICALLY DISTRESSED

51-20    AREAS.  (a)  In this section, "economically distressed area" and

51-21    "political subdivision" have the meanings assigned by Section

51-22    16.341 of this code.

51-23          (b)  The board may enter into contracts with a political

51-24    subdivision to pay from the research and planning fund all or part

51-25    of the cost of facility engineering in economically distressed

51-26    areas, including preparation of plans and specifications.

51-27          (c)  A political subdivision that desires money from the

51-28    research and planning fund for facility engineering in an

51-29    economically distressed area shall submit a written application to

 52-1    the board in the manner and form required by board rules.

 52-2          (d)  The application shall include:

 52-3                (1)  the name of the political subdivision;

 52-4                (2)  a citation to the laws under which the political

 52-5    subdivision was created and is operating;

 52-6                (3)  the amount requested from the board for facility

 52-7    engineering in an economically distressed area; and

 52-8                (4)  any other information required by the board in its

 52-9    rules or specifically requested by the board.

52-10          (e)  After notice and hearing, the board may award the

52-11    applicant all or part of the requested funds that are considered

52-12    necessary by the board for the political subdivision to carry out

52-13    adequate facility engineering in an economically distressed area.

52-14          (f)  If the board grants an application under this section

52-15    and awards funds for facility engineering in an economically

52-16    distressed area, the board shall enter into a contract with the

52-17    political subdivision that includes:

52-18                (1)  a detailed statement of the purpose for which the

52-19    money is to be used;

52-20                (2)  the total amount of money to be paid from the

52-21    research and planning fund under the contract; and

52-22                (3)  any other terms and conditions required by board

52-23    rules or agreed to by the contracting parties.

52-24          (g)  If, after submission of an application under this

52-25    section, a county has an increase in average per capita income or a

52-26    decrease in unemployment rate average so that the county no longer

52-27    meets the definition of an affected county in Section 16.341, the

52-28    political subdivision that submits the application continues to be

52-29    eligible for the funds under this section, and the board shall

 53-1    process the application for facility engineering and, if the

 53-2    application is approved, shall provide funds for the facility

 53-3    engineering plan to the political subdivision.

 53-4          SECTION 3.13.  Subchapter C, Chapter 16, Water Code, is

 53-5    amended by adding Section 16.059 to read as follows:

 53-6          Sec. 16.059.  REGIONAL WATER MANAGEMENT PLANS.  (a)  The

 53-7    executive administrator shall encourage the development and

 53-8    periodic revision, as necessary, of regional water management plans

 53-9    and may provide technical assistance with the development or

53-10    revision of such plans.

53-11          (b)  Regional water management plans shall be prepared by

53-12    political subdivisions under this section to assure an adequate,

53-13    reliable, and affordable long-term water supply for all of the

53-14    communities and public water supply systems within a designated

53-15    regional water management planning area.  Regional water management

53-16    plans shall be developed and revised with the substantive

53-17    participation of all communities, public water systems, and water

53-18    suppliers within a designated regional planning area and shall

53-19    include but are not limited to:

53-20                (1)  consideration and inclusion, as appropriate, of

53-21    all potentially feasible water management strategies including, but

53-22    not limited to, improved management of existing water supplies,

53-23    improved water use efficiency, water reuse and recycling, water

53-24    supply and water demand management during water shortage,

53-25    conjunctive use of surface water and groundwater supplies,

53-26    acquisition of available existing water supplies, and development

53-27    of new water supplies;

53-28                (2)  consideration and inclusion, as appropriate, of

53-29    water management strategy provisions contained in regional or local

 54-1    drought response plans;

 54-2                (3)  consideration of opportunities for and the

 54-3    benefits of developing regional water supply facilities or

 54-4    providing regional management of water supply facilities; and

 54-5                (4)  consideration of and appropriate provision for

 54-6    environmental water needs, including adequate water to maintain

 54-7    instream uses and freshwater inflows to the state's bays and

 54-8    estuaries.

 54-9          (c)  The board shall, in coordination with the Parks and

54-10    Wildlife Department and the commission, develop guidance consistent

54-11    with the state water plan for the development and revision of

54-12    regional water management plans.

54-13          (d)  The executive administrator shall designate the areas

54-14    for which regional water management plans shall be developed,

54-15    taking into consideration such factors as river basin and aquifer

54-16    delineations, water utility development patterns, socioeconomic

54-17    characteristics, and other factors the executive administrator

54-18    deems relevant.  The executive administrator may also designate a

54-19    political subdivision or group of political subdivisions within

54-20    each designated regional water management planning area to serve as

54-21    the coordinating body for planning.  The board shall adopt rules to

54-22    provide for the procedures for approval of regional water

54-23    management plans and to govern the procedures to be followed by the

54-24    executive administrator in carrying out the responsibilities of

54-25    this subsection.

54-26          (e)  In preparing, developing, and formulating the state

54-27    water plan, the executive administrator shall give consideration to

54-28    and incorporate, as appropriate, regional water management plans

54-29    approved by the board.

 55-1          (f)  The board may provide financial assistance to political

 55-2    subdivisions under Subchapters E and F of this chapter and

 55-3    Subchapters C, D, E, F, and J, Chapter 15, and Subchapters D, I, K,

 55-4    and L, Chapter 17 of this code for water projects only if the board

 55-5    determines that the needs to be addressed by the project will be

 55-6    addressed in a manner consistent with an approved regional water

 55-7    management plan for the area in which the facility is to be

 55-8    located, unless the board determines that conditions warrant waiver

 55-9    of this requirement.

55-10          SECTION 3.14.  Subdivision (3), Section 16.341, Water Code,

55-11    is amended to read as follows:

55-12                (3)  "Political subdivision" means an affected county,

55-13    a municipality located in an affected county, a district or

55-14    authority created under Article III, Section 52, or Article XVI,

55-15    Section 59, of the Texas Constitution, located in an affected

55-16    county, or a nonprofit water supply corporation created and

55-17    operating under Chapter 76, Acts of the 43rd Legislature, 1st

55-18    Called Session, 1933 (Article 1434a, Vernon's Texas Civil

55-19    Statutes), located in an affected county, that receives funds for

55-20    facility engineering under Section 15.408 [15.407] of this code or

55-21    financial assistance under Subchapter K, Chapter 17, of this code

55-22    or an economically distressed area in an affected county for which

55-23    financial assistance is received under Subchapter C, Chapter 15, of

55-24    this code.

55-25          SECTION 3.15.  Subsection (g), Section 16.343, Water Code, is

55-26    amended to read as follows:

55-27          (g)  Before filing an application for funds for facility

55-28    engineering under Section 15.408 [15.407] of this code or financial

55-29    assistance under Subchapter K, Chapter 17, of this code, a

 56-1    political subdivision must adopt the model rules pursuant to this

 56-2    section or, in the case of a district or nonprofit water supply

 56-3    corporation, must be located in a city or county that has adopted

 56-4    such rules.  An affected county may not receive funds under either

 56-5    Section 15.408 [15.407] of this code or Subchapter K, Chapter 17,

 56-6    of this code unless the county adopts and enforces the model rules.

 56-7          SECTION 3.16.  Subsection (a), Section 16.345, Water Code, is

 56-8    amended to read as follows:

 56-9          (a)  A political subdivision may exercise any authority

56-10    necessary to participate in a program under Section 15.408 [15.407]

56-11    of this code or Subchapter K, Chapter 17, of this code and carry

56-12    out the terms and conditions under which the funds or the financial

56-13    assistance is provided.

56-14          SECTION 3.17.  Subsections (a) and (d), Section 16.350, Water

56-15    Code, are amended to read as follows:

56-16          (a)  A county or municipality that applies for or receives

56-17    funds or financial assistance under Section 15.408 [15.407] of this

56-18    code or Subchapter K, Chapter 17, of this code  must adopt and

56-19    enforce the model rules developed under Section 16.343 of this code

56-20    to be eligible to participate in this program.  The county or

56-21    municipality by order or ordinance shall adopt and enter the model

56-22    rules in the minutes of a meeting of its governing body and shall

56-23    publish notice of that action in a newspaper with general

56-24    circulation in the county or municipality.  A municipality is

56-25    eligible to participate in this program only if the county in which

56-26    the project is located adopts and enforces the model rules.

56-27          (d)  A county or municipality that receives funds or

56-28    financial assistance under Section 15.408 [15.407] of this code or

56-29    Subchapter K, Chapter 17, of this code may grant an exemption for a

 57-1    subdivision from the requirements of the model rules only if the

 57-2    county or municipality supplies the subdivision with water supply

 57-3    and sewer services that meet the standards of the model rules.

 57-4          SECTION 3.18.  Section 17.895, Water Code, is amended by

 57-5    adding Subsection (c) to read as follows:

 57-6          (c)  The board may make conservation loans to borrower

 57-7    districts for the cost of purchasing and installing devices, on

 57-8    public or private property, designed to indicate the amount of

 57-9    water withdrawn for irrigation purposes.

57-10          SECTION 3.19.  Section 17.926, Water Code, is amended to read

57-11    as follows:

57-12          Sec. 17.926.  APPLICANTS' CONTINUED ELIGIBILITY.  If, after

57-13    submission of a financial assistance application under this

57-14    subchapter or an application for funds under Section 15.408

57-15    [15.407], a county has an increase in average per capita income or

57-16    decrease in unemployment rate average so that the county no longer

57-17    meets the criteria in this subchapter, the political subdivision

57-18    that submits the application continues to be eligible for the

57-19    financial assistance under this subchapter, and the board shall

57-20    process the application and, if the application is approved, shall

57-21    provide financial assistance to the political subdivision to

57-22    complete the project.

57-23          SECTION 3.20.  Section 27.0511, Water Code, is amended by

57-24    adding Subsection (h) to read as follows:

57-25          (h)  If the railroad commission receives an application for

57-26    an injection well using fresh water for enhanced recovery purposes

57-27    and the well is to be located in a groundwater conservation

57-28    district, the railroad commission shall give notice to the district

57-29    in which the well is to be located that the application has been

 58-1    received and is being considered.  The railroad commission shall

 58-2    determine whether the permit application is consistent with the

 58-3    district's management plan.

 58-4          SECTION 3.21.  Subdivision (12), Section 35.002, Water Code,

 58-5    is amended to read as follows:

 58-6                (12)  "Priority groundwater management [Critical] area"

 58-7    means an area designated and delineated by the commission as an

 58-8    area that is experiencing or is expected to experience critical

 58-9    groundwater problems.

58-10          SECTION 3.22.  Section 35.007, Water Code, is amended to read

58-11    as follows:

58-12          Sec. 35.007.  IDENTIFYING, DESIGNATING, AND DELINEATING

58-13    PRIORITY GROUNDWATER MANAGEMENT [CRITICAL] AREAS.  (a)  The

58-14    executive director and the executive administrator shall meet at

58-15    least once a year to identify, based on information available to

58-16    the commission and the Texas Water Development Board, those areas

58-17    of the state that are experiencing or that are expected to

58-18    experience, [based on information available to the commission and

58-19    the Texas Water Development Board,] within the immediately

58-20    following 50-year [20-year] period, critical groundwater problems,

58-21    including shortages of surface water or groundwater, land

58-22    subsidence resulting from groundwater withdrawal, and contamination

58-23    of groundwater supplies.

58-24          (b)  If the executive director concludes that an area of the

58-25    state should be considered for designation as a priority

58-26    groundwater management [critical] area, the executive director

58-27    shall prepare a report to the commission.

58-28          (c)  The executive director shall begin preparation of a

58-29    priority groundwater management [critical] area report by

 59-1    requesting a study from the executive administrator.  The study

 59-2    must:

 59-3                (1)  include an appraisal of the hydrogeology of the

 59-4    area and matters within the Texas Water Development Board's

 59-5    planning expertise relevant to the area;

 59-6                (2)  assess the area's immediate, short-term, and

 59-7    long-term water supply and needs; and

 59-8                (3)  [.  The study must] be completed and delivered to

 59-9    the executive director on or before the 180th [90th] day following

59-10    the date of the request.  If the study is not delivered within this

59-11    180-day [90-day] period, the executive director may proceed with

59-12    the preparation of the report.

59-13          (d)  The executive director shall request a study from the

59-14    executive director of the Parks and Wildlife Department for the

59-15    purpose of preparing the report required by this section.  The

59-16    study must:

59-17                (1)  evaluate the potential effects of the designation

59-18    of a priority groundwater management area on an area's fish and

59-19    wildlife resources; and

59-20                (2)  be completed and delivered to the executive

59-21    director on or before the 180th day following the date of the

59-22    request.  If the study is not delivered within this 180-day period,

59-23    the executive director may proceed with the preparation of the

59-24    report.

59-25          (e)  The report shall include:

59-26                (1)  the recommended delineation of the boundaries of

59-27    any proposed priority groundwater management [critical] area in the

59-28    form of an order [a rule] to be considered for adoption by the

59-29    commission;

 60-1                (2)  the reasons and supporting information for or

 60-2    against designating the area as a priority groundwater management

 60-3    [critical] area;

 60-4                (3)  a recommendation regarding whether a district

 60-5    should be created in the priority groundwater management [critical]

 60-6    area or whether the priority groundwater management [critical] area

 60-7    should be added to an existing district;

 60-8                (4)  a recommendation as to actions that should be

 60-9    considered to conserve fish and wildlife resources; and

60-10                (5)  any other information that the executive director

60-11    considers helpful to the commission.

60-12          (f) [(e)]  The executive director must complete the report

60-13    and file it with the commission on or before the 240th [210th] day

60-14    following the date on which the executive administrator was

60-15    requested  to produce a study.  The executive director shall make

60-16    the report available for public inspection by providing a copy of

60-17    the report to at least one library in each county in which the

60-18    proposed priority groundwater management [critical] area is

60-19    located.

60-20          (g) [(f)]  To carry out this section, the executive director

60-21    may make necessary studies, hold hearings, solicit and collect

60-22    information, and use information already prepared by the executive

60-23    director or the executive administrator for other purposes.

60-24          SECTION 3.23.  Section 35.008, Water Code, is amended to read

60-25    as follows:

60-26          Sec. 35.008.  PROCEDURES FOR DESIGNATION OF PRIORITY

60-27    GROUNDWATER MANAGEMENT AREA; CONSIDERATION OF CREATION OF DISTRICT

60-28    OR ADDITION OF LAND IN PRIORITY GROUNDWATER MANAGEMENT AREA TO

60-29    EXISTING DISTRICT [CRITICAL AREAS].  (a)  The commission shall

 61-1    designate priority groundwater management [critical] areas using

 61-2    the procedures provided by this chapter in lieu of those provided

 61-3    by [applicable to rulemaking under the Administrative Procedure

 61-4    Act,] Subchapter B, Chapter 2001, Government Code[, but if

 61-5    procedures required by this chapter are in conflict with that Act,

 61-6    this chapter controls].

 61-7          (b)  The commission shall call an evidentiary hearing to

 61-8    consider:

 61-9                (1)  the designation of a priority groundwater

61-10    management area;

61-11                (2)  whether a district should be created over all or

61-12    part of a priority groundwater management area; or

61-13                (3)  whether all or part of the land in the priority

61-14    groundwater management area should be added to an existing

61-15    district.

61-16          (c)  Evidentiary hearings shall be held at a location in one

61-17    of the counties in which the priority groundwater management area

61-18    is located, or proposed to be located, or in the nearest convenient

61-19    location if adequate facilities are not available in those

61-20    counties.

61-21          (d)  At the hearing, the commission shall hear testimony and

61-22    receive evidence from affected persons.  The commission shall

61-23    consider the executive director's report and supporting information

61-24    and the testimony and evidence received at the hearing.  If the

61-25    commission considers further information necessary, the commission

61-26    may request such information from any source.

61-27          (e)  The designation of a priority groundwater management

61-28    [critical] area may not be appealed nor may it be challenged under

61-29    the Administrative Procedure Act, Section 2001.038, Government

 62-1    Code.

 62-2          SECTION 3.24.  Section 35.009, Water Code, is amended to read

 62-3    as follows:

 62-4          Sec. 35.009.  NOTICE AND HEARING.  (a)  The [In addition to

 62-5    the notice required for rulemaking under the Administrative

 62-6    Procedure Act, Section 2001.023, Government Code, the] commission

 62-7    shall have notice of the hearing published in at least one

 62-8    newspaper with general circulation in the county or counties in

 62-9    which the area being designated a proposed priority groundwater

62-10    management [critical] area or the area within a priority

62-11    groundwater management area being considered for district creation

62-12    or for addition to an existing district is [to be] located.  Notice

62-13    must be published not later than the 30th day before the date set

62-14    for the commission to consider the designation of the priority

62-15    groundwater management [critical] area, the creation of a district

62-16    in a priority groundwater management area, or the addition of land

62-17    in a priority groundwater management area to an existing district.

62-18          (b)  The notice must include:

62-19                (1)  if applicable, a statement of the general purpose

62-20    and effect of designating the proposed priority groundwater

62-21    management area [critical areas];

62-22                (2)  if applicable, a statement of the general purpose

62-23    and effect of creating a district in the priority groundwater

62-24    management area;

62-25                (3)  if applicable, a statement that all or part of the

62-26    land in the priority groundwater management area could be added to

62-27    an existing district;

62-28                (4)  a map generally outlining the boundaries of the

62-29    area being considered for priority groundwater management [proposed

 63-1    critical] area designation or the priority groundwater management

 63-2    area being considered for district creation or for addition to an

 63-3    existing district, or notice of the location at which a copy of the

 63-4    map may be examined or obtained;

 63-5                (5)  a statement that the full executive director's

 63-6    report concerning the priority groundwater management area or

 63-7    proposed area is available at the commission's main office in

 63-8    Austin, Texas, and at regional offices of the commission for

 63-9    regions which include territory within the priority groundwater

63-10    management area or proposed priority groundwater management area

63-11    and that the report is available for inspection during regular

63-12    business hours;

63-13                (6) [(3)]  a description or the name of the locations

63-14    in the affected area at which the commission has provided copies of

63-15    the executive director's report to be made available for public

63-16    inspection;

63-17                (7)  the name and address of each library in the

63-18    proposed priority groundwater management area to which the

63-19    commission has provided copies of the executive director's report;

63-20    and

63-21                (8) [(4)]  the date, time, and place of the hearing [at

63-22    which the commission will consider the designation of the critical

63-23    areas].

63-24          (c)  The commission shall also give written notice of the

63-25    date, time, place, and purpose of the hearing to the governing body

63-26    of each county, municipality, river authority, water district, or

63-27    other entity which supplies public drinking water located either

63-28    partially or entirely in the priority groundwater management area

63-29    or proposed priority groundwater management area.  The notice must

 64-1    be given before the 30th day preceding the date set for the

 64-2    hearing.

 64-3          SECTION 3.25.  Subsections (b), (c), (d), and (e), Section

 64-4    35.012, Water Code, are amended to read as follows:

 64-5          (b)  If the commission finds that the land and other property

 64-6    in the priority groundwater management [critical] area would

 64-7    benefit from the creation of one or more districts, that there is a

 64-8    public need for one or more districts, and that the creation of one

 64-9    or more districts would further the public welfare, the commission

64-10    shall issue an order stating that the creation of one or more

64-11    districts is needed.

64-12          (c)  Following [During the period between] the [date of]

64-13    issuance of a commission order under Subsection (b) [and one year

64-14    after the close of the next regular session of the legislature

64-15    following the issuance of the order], the landowners in the

64-16    priority groundwater management [critical] area may:

64-17                (1)  create one or more districts under Subchapter B,

64-18    Chapter 36;

64-19                (2)  have the area annexed to a district that adjoins

64-20    the area; or

64-21                (3)  create one or more districts through the

64-22    legislative process.

64-23          (d)  The commission shall identify the areas subject to the

64-24    order of the commission issued under Subsection (b) that have not[,

64-25    in the period provided by Subsection (c),] been incorporated into a

64-26    district[,] and shall delineate proposed boundaries of a district

64-27    to include those areas.  If the commission proposes the creation of

64-28    one or more districts, the commission shall begin the procedures

64-29    for creation of a district provided in Subchapter B, Chapter 36.

 65-1          (e)  If the commission fails to find that the district would

 65-2    be a benefit to the land and other property within the priority

 65-3    groundwater management [critical] area, that there is a public need

 65-4    for the district, or that creation of the district will further the

 65-5    public welfare, the commission shall issue an order stating that a

 65-6    district should not be created within the boundaries of the

 65-7    priority groundwater management [critical] area.

 65-8          SECTION 3.26.  Section 35.013, Water Code, is amended to read

 65-9    as follows:

65-10          Sec. 35.013.  ADDING PRIORITY GROUNDWATER MANAGEMENT

65-11    [CRITICAL] AREA TO EXISTING DISTRICT.  (a)  If land in a priority

65-12    groundwater management [critical] area is located adjacent to one

65-13    or more existing districts, the commission, instead of issuing an

65-14    order under Section 35.012, may issue an order recommending that

65-15    the priority groundwater management [critical] area be added to the

65-16    existing district designated by the commission.  In its order, the

65-17    commission must find that the land and other property in the

65-18    priority groundwater management [critical] area and the land in the

65-19    existing district will benefit from the addition of the area, that

65-20    there is a public need to add the priority groundwater management

65-21    [critical] area to the existing district, and that the addition of

65-22    the land to the existing district would further the public welfare.

65-23          (b)  If the executive director recommends that the priority

65-24    groundwater management [critical] area be added to an existing

65-25    district or if the commission considers it possible to add the

65-26    priority groundwater management [critical] area to an adjacent

65-27    existing district, the commission shall give notice to the board of

65-28    the existing district recommended by the executive director or

65-29    considered by the commission to possibly serve the area and to any

 66-1    other existing districts adjacent to the priority groundwater

 66-2    management [critical] area.

 66-3          (c)  The commission shall submit a copy of the order to the

 66-4    board of the district to which it is recommending the priority

 66-5    groundwater management [critical] area be added.  The board shall

 66-6    vote on the addition of the priority groundwater management

 66-7    [critical] area to the district and shall advise the commission of

 66-8    the outcome.

 66-9          (d)  If the board votes to accept the addition of the

66-10    priority groundwater management [critical] area to the district,

66-11    the board shall call an election within the priority groundwater

66-12    management [critical] area as delineated by the commission to

66-13    determine if the priority groundwater management [critical] area

66-14    will be added to the district.  In the order calling the election,

66-15    the board shall designate election precincts and polling places for

66-16    the elections.

66-17          (e)  The board shall give notice of the election and the

66-18    proposition to be voted on.  The board shall publish notice of the

66-19    election at least one time in one or more newspapers with general

66-20    circulation within the boundaries of the priority groundwater

66-21    management [critical] area.  The notice must be published before

66-22    the 30th day preceding the date set for the election.

66-23          (f)  The ballots for the election shall be printed to provide

66-24    for voting for or against the proposition:  "The inclusion of

66-25    __________ (briefly describe priority groundwater management

66-26    [critical] area) in the __________ District."  If the district has

66-27    issued bonds, the proposition shall include the following language:

66-28    "and assumption by the described area of a proportional share of

66-29    the outstanding indebtedness of the district."

 67-1          (g)  Immediately after the election, the presiding judge of

 67-2    each polling place shall deliver the returns of the election to the

 67-3    board, and the board shall canvass the returns for the election

 67-4    within the priority groundwater management [critical] area and

 67-5    declare the results.  If a majority of the voters in the priority

 67-6    groundwater management [critical] area voting on the proposition

 67-7    vote in favor of the proposition, the board shall declare that the

 67-8    priority groundwater management [critical] area is added to the

 67-9    district.  If a majority of the voters in the priority groundwater

67-10    management [critical] area voting on the proposition vote against

67-11    adding the priority groundwater management [critical] area to the

67-12    district, the board shall declare that the priority groundwater

67-13    management [critical] area is not added to the district.  The board

67-14    shall file a copy of the election results with the commission.

67-15          (h)  If the voters approve adding the priority groundwater

67-16    management [critical] area to the district, the board of the

67-17    district to which the priority groundwater management [critical]

67-18    area is added shall provide reasonable representation on that board

67-19    compatible with the district's existing scheme of representation.

67-20          (i)  If the proposition is defeated, another election to add

67-21    the priority groundwater management [critical] area to an existing

67-22    district may not be called before the first anniversary of the date

67-23    on which the election on the proposition was held.

67-24          SECTION 3.27.  Subsections (b) and (c), Section 35.014, Water

67-25    Code, are amended to read as follows:

67-26          (b)  The costs of an election to add a priority groundwater

67-27    management [critical] area to an existing district at which the

67-28    voters approve adding the priority groundwater management

67-29    [critical] area to the district shall be paid by the existing

 68-1    district.

 68-2          (c)  The costs of an election to create a district or add a

 68-3    priority groundwater management [critical] area to an existing

 68-4    district at which the proposition fails shall be paid by the

 68-5    commission.

 68-6          SECTION 3.28.  Section 35.015, Water Code, is amended to read

 68-7    as follows:

 68-8          Sec. 35.015.  STATE ASSISTANCE.  [(a)  A political

 68-9    subdivision located in or that has within its boundaries an area or

68-10    part of an area delineated as a critical area, and in which the

68-11    qualified voters fail to approve the creation of a district or to

68-12    join an existing district, shall not be eligible to receive any

68-13    financial assistance from the state under Chapter 15, 16, or 17 for

68-14    use within that portion of the critical area not covered by a

68-15    district.]

68-16          [(b)]  A political subdivision located in an area delineated

68-17    as a priority groundwater management [critical] area, and in which

68-18    qualified voters approve the creation of a district or annexation

68-19    into an existing district, shall be given consideration to receive

68-20    financial assistance from the state under Chapter 17 for funds to

68-21    be used in addressing issues identified in the priority groundwater

68-22    management [critical] area report in the manner provided by

68-23    Sections 17.124 and 17.125[, except that the board is not required

68-24    to make the finding set out in Section 17.125(a)(2)].

68-25          SECTION 3.29.  Subsection (b), Section 35.016, Water Code, is

68-26    amended to read as follows:

68-27          (b)  A district is considered active unless the commission

68-28    has determined under Section 36.302 that the district is not

68-29    operational [if it meets the requirements in Section 36.301(c)].

 69-1          SECTION 3.30.  Section 35.017, Water Code, is amended to read

 69-2    as follows:

 69-3          Sec. 35.017.  STATE-OWNED LAND.  If state-owned land or a

 69-4    portion of state-owned land is located in a priority groundwater

 69-5    management [critical] area, the state agency that has management

 69-6    and control over that land under the constitution or by statute may

 69-7    elect by written agreement with the commission and the district to

 69-8    include the state-owned land in the district.  The agreement shall

 69-9    be entered into as provided by the Texas Intergovernmental

69-10    Cooperation Act, Chapter 741, Government Code, and may include

69-11    provisions for the payment by the state agency of reasonable fees

69-12    to the district.  If the state does not elect to enter into the

69-13    agreement to include the state-owned land in the district, the

69-14    state agency must establish a groundwater management plan that will

69-15    conserve, protect, and prevent the waste of groundwater on that

69-16    state-owned land.

69-17          SECTION 3.31.  Chapter 35, Water Code, is amended by adding

69-18    Section 35.018 to read as follows:

69-19          Sec. 35.018.  REPORTS.  (a)  Not later than January 31 of

69-20    each odd-numbered year, the commission in conjunction with the

69-21    Texas Water Development Board shall prepare and deliver to the

69-22    governor, the lieutenant governor, and the speaker of the house of

69-23    representatives a comprehensive report concerning activities during

69-24    the preceding two years relating to the designation of priority

69-25    groundwater management areas by the commission, the creation of

69-26    districts, and the operation of districts.

69-27          (b)  The report must include:

69-28                (1)  the names and locations of all priority

69-29    groundwater management areas and districts created or attempted to

 70-1    be created on or after November 5, 1985, the effective date of

 70-2    Chapter 133 (H.B. No. 2), Acts of the 69th Legislature, Regular

 70-3    Session, 1985;

 70-4                (2)  the authority under which each priority

 70-5    groundwater management area and district was proposed for creation;

 70-6                (3)  a detailed analysis of each election held to

 70-7    confirm the creation of a district, including analysis of election

 70-8    results, possible reasons for the success or failure to confirm the

 70-9    creation of a district, and the possibility for future voter

70-10    approval of districts in areas in which attempts to create

70-11    districts failed;

70-12                (4)  a detailed analysis of the activities of each

70-13    district created, including those districts which are implementing

70-14    management plans approved under Section 36.1072;

70-15                (5)  a report on audits performed on districts under

70-16    Section 36.302 and remedial actions taken under Section 36.303;

70-17                (6)  recommendations for changes in this chapter and

70-18    Chapter 36 that will facilitate the creation of priority

70-19    groundwater management areas and the creation and operation of

70-20    districts; and

70-21                (7)  any other information and recommendations that the

70-22    commission considers relevant.

70-23          SECTION 3.32.  Section 36.001, Water Code, is amended by

70-24    amending Subdivision (14) and adding Subdivisions (16) and (17) to

70-25    read as follows:

70-26                (14)  "Priority groundwater management [Critical] area"

70-27    means an area designated and delineated by the commission under

70-28    Chapter 35 as an area experiencing or expected to experience

70-29    critical groundwater problems.

 71-1                (16)  "Loan fund" means the groundwater district loan

 71-2    assistance fund created under Section 36.371.

 71-3                (17)  "Applicant" means a newly confirmed district

 71-4    applying for a loan from the loan fund.

 71-5          SECTION 3.33.  Subsection (c), Section 36.012, Water Code, is

 71-6    amended to read as follows:

 71-7          (c)  The boundaries of a district must be coterminous with or

 71-8    inside the boundaries of a management area or a priority

 71-9    groundwater management [critical] area.

71-10          SECTION 3.34.  Subsection (d), Section 36.013, Water Code, is

71-11    amended to read as follows:

71-12          (d)  If a part of the proposed district is not included

71-13    within either a management area or a priority groundwater

71-14    management [critical] area, the petition to create a district may

71-15    also contain a request to create a management area.  A request to

71-16    create a management area must comply with the requirements for a

71-17    petition in Section 35.005, and may be acted on by the commission

71-18    separately from the petition to create the district.

71-19          SECTION 3.35.  Subchapter B, Chapter 36, Water Code, is

71-20    amended by adding Section 36.0151 to read as follows:

71-21          Sec. 36.0151.  CREATION OF DISTRICT FOR PRIORITY GROUNDWATER

71-22    MANAGEMENT AREA.  (a)  If the commission proposes that a district

71-23    be created under Section 35.012(d), it shall in its order creating

71-24    the district provide that temporary directors be appointed under

71-25    Section 36.016 and that an election be called by the temporary

71-26    directors to confirm the creation of the district and to elect

71-27    permanent directors.

71-28          (b)  The commission shall notify the county commissioners

71-29    court of each county with territory in the district of the

 72-1    district's creation as soon as practicable after issuing the order

 72-2    creating the district.

 72-3          SECTION 3.36.  Section 36.016, Water Code, is amended to read

 72-4    as follows:

 72-5          Sec. 36.016.  APPOINTMENT OF TEMPORARY DIRECTORS.  (a)  If

 72-6    the commission grants a petition to create a district under Section

 72-7    36.015 or after the commission dissolves a district's board under

 72-8    Section 36.303, it shall appoint five temporary directors.

 72-9          (b)  If the commission creates a district under Section

72-10    36.0151, the county commissioners court or courts of the county or

72-11    counties that contain the area of the district shall, within 90

72-12    days after receiving notification by the commission under Section

72-13    36.0151(b), appoint five temporary directors, or more if the

72-14    district contains the territory of more than five counties, for the

72-15    district's board using the method provided by Section 36.0161.  A

72-16    county commissioners court shall not make any appointments after

72-17    the expiration of the 90-day period.  If fewer than five temporary

72-18    directors have been appointed at the expiration of the period, the

72-19    commission shall appoint additional directors so that the board has

72-20    at least five members.

72-21          (c)  Temporary directors appointed under this section [who]

72-22    shall serve until the initial directors are elected and have

72-23    qualified for office or until the voters fail to approve the

72-24    creation of the district.

72-25          (d) [(b)]  If an appointee of the commission or of a county

72-26    commissioners court or county commissioners courts fails to qualify

72-27    or if a vacancy occurs in the office of temporary director, the

72-28    commission or the county commissioners court or courts, as

72-29    appropriate, shall appoint an individual to fill the vacancy.

 73-1          (e) [(c)]  As soon as all temporary directors have qualified,

 73-2    the directors shall meet, take the oath of office, and elect a

 73-3    chairman and vice chairman from among their membership.  The

 73-4    chairman shall preside at all meetings of the board and, in the

 73-5    chairman's absence, the vice chairman shall preside.

 73-6          SECTION 3.37.  Subchapter B, Chapter 36, Water Code, is

 73-7    amended by adding Section 36.0161 to read as follows:

 73-8          Sec. 36.0161.  METHOD FOR APPOINTING TEMPORARY DIRECTORS FOR

 73-9    DISTRICT IN PRIORITY GROUNDWATER MANAGEMENT AREA.  (a)  If a

73-10    district in a priority groundwater management area is:

73-11                (1)  contained within one county, the county

73-12    commissioners court of that county shall appoint five temporary

73-13    directors for the district;

73-14                (2)  contained within two counties, the county

73-15    commissioners court of each county shall appoint at least one

73-16    temporary director, with the appointments of the three remaining

73-17    directors to be apportioned as provided by Subsection (b);

73-18                (3)  contained within three counties, the county

73-19    commissioners court of each county shall appoint at least one

73-20    temporary director, with the appointments of the two remaining

73-21    directors to be apportioned as provided by Subsection (b);

73-22                (4)  contained within four counties, the county

73-23    commissioners court of each county shall appoint at least one

73-24    temporary director, with the appointment of the remaining director

73-25    to be apportioned as provided by Subsection (b); or

73-26                (5)  contained within five or more counties, the county

73-27    commissioners court of each county shall appoint one temporary

73-28    director.

73-29          (b)(1)  In this subsection, "estimated groundwater use" means

 74-1    the estimate of groundwater use in acre-feet developed by the

 74-2    commission under Subsection (c) for the area of a county that is

 74-3    within the district.

 74-4                (2)  The apportionment of appointments under Subsection

 74-5    (a) shall be made by the commission so as to reflect, as closely as

 74-6    possible, the proportion each county's estimated groundwater use

 74-7    bears to the sum of the estimated groundwater use for the district

 74-8    as determined under Subsection (c).  The commission shall by rule

 74-9    determine the method it will use to implement this subdivision.

74-10          (c)  If a district is contained within two, three, or four

74-11    counties, the commission shall develop an estimate of annual

74-12    groundwater use in acre-feet for each county area within the

74-13    district.

74-14          SECTION 3.38.  Section 36.102, Water Code, is amended to read

74-15    as follows:

74-16          Sec. 36.102.  ENFORCEMENT OF RULES.  (a)  A district may

74-17    enforce this chapter and its rules by injunction, mandatory

74-18    injunction, or other appropriate remedy in a court of competent

74-19    jurisdiction.

74-20          (b)  [The board may set reasonable civil penalties for breach

74-21    of any rule of the district that shall not exceed the jurisdiction

74-22    of a justice court as provided by Section 27.031, Government Code.]

74-23          [(c)  A penalty under this section is in addition to any

74-24    other penalty provided by the law of this state and may be enforced

74-25    by complaints filed in the appropriate court of jurisdiction in the

74-26    county in which the district's principal office or meeting place is

74-27    located.]

74-28          [(d)]  If the district prevails in any suit to enforce its

74-29    rules, it may, in the same action, recover reasonable fees for

 75-1    attorneys, expert witnesses, and other costs incurred by the

 75-2    district before the court.  The amount of the attorney's fees shall

 75-3    be fixed by the court.

 75-4          (c)  The district may issue orders in accordance with Chapter

 75-5    2001, Government Code, to enforce the terms and conditions of

 75-6    permits, orders, or rules issued or adopted under this chapter.

 75-7          SECTION 3.39.  Subchapter D, Chapter 36, Water Code, is

 75-8    amended by adding Section 36.1021 to read as follows:

 75-9          Sec. 36.1021.  ADMINISTRATIVE PENALTY.  (a)  A district may

75-10    assess an administrative penalty against a person who violates this

75-11    chapter or a rule adopted or order issued under this chapter in an

75-12    amount not to exceed $10,000 a day for each violation and for each

75-13    day of a continuing violation.

75-14          (b)  In determining the amount of the penalty, the district

75-15    shall consider:

75-16                (1)  the nature, circumstances, extent, duration, and

75-17    gravity of the prohibited acts, with special emphasis on the

75-18    impairment of existing water rights or the hazard or potential

75-19    hazard created to the health, safety, or welfare of the public;

75-20                (2)  the impact of the violation on the instream uses,

75-21    water quality, aquatic and wildlife habitat, or beneficial

75-22    freshwater inflows to bays and estuaries;

75-23                (3)  with respect to the alleged violator:

75-24                      (A)  the history and extent of previous

75-25    violations;

75-26                      (B)  the degree of culpability, including whether

75-27    the violation was attributable to mechanical or electrical failures

75-28    and whether the violation could have been reasonably anticipated

75-29    and avoided;

 76-1                      (C)  demonstrated good faith, including actions

 76-2    taken by the alleged violator to rectify the cause of the violation

 76-3    and to compensate affected persons;

 76-4                      (D)  any economic benefit gained through the

 76-5    violation; and

 76-6                      (E)  the amount necessary to deter future

 76-7    violations; and

 76-8                (4)  any other matters that justice may require.

 76-9          (c)  If after an examination of the facts the district

76-10    concludes that the person did commit a violation, the district may

76-11    issue a preliminary report stating the facts on which it based its

76-12    conclusion, recommending that an administrative penalty under this

76-13    section be imposed, and recommending the amount of the proposed

76-14    penalty.

76-15          (d)  The district shall give written notice of the report to

76-16    the person charged with committing the violation.  The notice must

76-17    include a brief summary of the facts, a statement of the amount of

76-18    the recommended penalty, and a statement of the person's right to

76-19    an informal review of the occurrence of the violation, the amount

76-20    of the penalty, or both the occurrence of the violation and the

76-21    amount of the penalty.

76-22          (e)  Not later than the 10th day after the date on which the

76-23    person charged with committing the violation receives the notice,

76-24    the person may either give the district written consent to the

76-25    report, including the recommended penalty, or make a written

76-26    request for an informal review or a formal hearing by the district.

76-27          (f)  If the person charged with committing the violation

76-28    consents to the penalty recommended by the district or fails timely

76-29    to request an informal review or a formal hearing, the district

 77-1    shall assess the penalty.  The district shall give the person

 77-2    written notice of its action.  The person shall pay the penalty not

 77-3    later than the 30th day after the date on which the person receives

 77-4    the notice.

 77-5          (g)  If the person charged with committing a violation

 77-6    requests an informal review as provided by Subsection (e), the

 77-7    district shall conduct the review.  The district shall give the

 77-8    person written notice of the results of the review not later than

 77-9    60 days from the date of the request.

77-10          (h)  Not later than the 10th day after the date on which the

77-11    person charged with committing the violation receives the notice

77-12    prescribed by Subsection (g), the person may make to the district a

77-13    written request for a formal hearing.

77-14          (i)  If, after informal review, a person who has been ordered

77-15    to pay a penalty fails to request a formal hearing in a timely

77-16    manner, the district shall assess the penalty.  The district shall

77-17    give the person written notice of its action.  The person shall pay

77-18    the penalty not later than the 30th day after the date on which the

77-19    person receives the notice.

77-20          (j)  Within 30 days after the date the district's order

77-21    becomes final as provided by Section 2001.144, Government Code, the

77-22    person shall:

77-23                (1)  pay the amount of the penalty;

77-24                (2)  pay the amount of the penalty and file a petition

77-25    for judicial review contesting the occurrence of the violation, the

77-26    amount of the penalty, or both the occurrence of the violation and

77-27    the amount of the penalty; or

77-28                (3)  without paying the amount of the penalty, file a

77-29    petition for judicial review contesting the occurrence of the

 78-1    violation, the amount of the penalty, or both the occurrence of the

 78-2    violation and the amount of the penalty.

 78-3          (k)  Within the 30-day period, a person who acts under

 78-4    Subsection (j)(3) of this section may:

 78-5                (1)  stay enforcement of the penalty by:

 78-6                      (A)  paying the amount of the penalty to the

 78-7    court for placement in an escrow account; or

 78-8                      (B)  giving to the court a supersedeas bond that

 78-9    is approved by the court for the amount of the penalty and that is

78-10    effective until all judicial review of the district's order is

78-11    final; or

78-12                (2)  request the court to stay enforcement of the

78-13    penalty by:

78-14                      (A)  filing with the court a sworn affidavit of

78-15    the person stating that the person is financially unable to pay the

78-16    amount of the penalty and is financially unable to give the

78-17    supersedeas bond; and

78-18                      (B)  giving a copy of the affidavit to the

78-19    district by certified mail.

78-20          (l)  If the district receives a copy of an affidavit under

78-21    Subsection (k)(2), it may file with the court within five days

78-22    after the date the copy is received a contest to the affidavit.

78-23    The court shall hold a hearing on the facts alleged in the

78-24    affidavit as soon as practicable and shall stay the enforcement of

78-25    the penalty on finding that the alleged facts are true.  The person

78-26    who files an affidavit has the burden of proving that the person is

78-27    financially unable to pay the amount of the penalty and to give a

78-28    supersedeas bond.

78-29          (m)  If the person does not pay the amount of the penalty and

 79-1    the enforcement of the penalty is not stayed, the district may

 79-2    refer the matter to the attorney general for collection of the

 79-3    amount of the penalty.

 79-4          (n)  Judicial review of the order of the district:

 79-5                (1)  is instituted by filing a petition as provided by

 79-6    Subchapter G, Chapter 2001, Government Code; and

 79-7                (2)  is under the substantial evidence rule.

 79-8          (o)  If the court sustains the occurrence of the violation,

 79-9    the court may uphold or reduce the amount of the penalty and order

79-10    the person to pay the full or reduced amount of the penalty.  If

79-11    the court does not sustain the occurrence of the violation, the

79-12    court shall order that no penalty is owed.

79-13          (p)  When the judgment of the court becomes final, the court

79-14    shall proceed under this subsection.  If the person paid the amount

79-15    of the penalty and if that amount is reduced or is not upheld by

79-16    the court, the court shall order that the appropriate amount plus

79-17    accrued interest be remitted to the person.  The rate of interest

79-18    is the rate charged on loans to depository institutions by the New

79-19    York Federal Reserve Bank, and the interest shall be paid for the

79-20    period beginning on the date the penalty was paid and ending on the

79-21    date the penalty is remitted.  If the person gave a supersedeas

79-22    bond and if the amount of the penalty is not upheld by the court,

79-23    the court shall order the release of the bond.  If the person gave

79-24    a supersedeas bond and if the amount of the penalty is reduced, the

79-25    court shall order the release of the bond after the person pays the

79-26    reduced amount.

79-27          (q)  A penalty collected under this section shall be remitted

79-28    to the district.

79-29          (r)  All proceedings under this section are subject to

 80-1    Chapter 2001, Government Code.

 80-2          SECTION 3.40.  Section 36.104, Water Code, is amended to read

 80-3    as follows:

 80-4          Sec. 36.104.  PURCHASE, SALE, TRANSPORTATION, AND

 80-5    DISTRIBUTION OF WATER.  (a)  A district may purchase, sell,

 80-6    transport, and distribute surface water or groundwater for any

 80-7    purpose.

 80-8          (b)  An export of groundwater may be limited if there is an

 80-9    existing and foreseeable need for the water that is identified in

80-10    the district's management plan and there is no alternative within

80-11    the district.

80-12          SECTION 3.41.  Subchapter D, Chapter 36, Water Code, is

80-13    amended by amending Section 36.107 and adding Sections 36.1071,

80-14    36.1072, and 36.1073 to read as follows:

80-15          Sec. 36.107.  RESEARCH [AND PLANNING].  [(a)]  A district may

80-16    carry out any research projects deemed necessary by the board.

80-17          Sec. 36.1071.  MANAGEMENT PLAN.  (a)[(b)]  Following notice

80-18    and hearing, the district shall, in coordination with surface water

80-19    management entities on a regional basis, develop a comprehensive

80-20    management plan which addresses the following management goals:

80-21                (1)  providing the most efficient use of groundwater;

80-22                (2)  controlling and preventing waste of groundwater;

80-23                (3)  controlling and preventing subsidence;

80-24                (4)  addressing conjunctive surface water management

80-25    issues; and

80-26                (5)  addressing fish and wildlife resource issues,

80-27    especially those associated with springs.

80-28          (b)  In the management plan described under Subsection (a),

80-29    the district shall:

 81-1                (1)  identify the performance standards and management

 81-2    objectives under which the district will operate to achieve the

 81-3    management goals identified under Subsection (a);

 81-4                (2)  specify, in as much detail as possible, the

 81-5    actions, procedures, performance, and avoidance that are or may be

 81-6    necessary to effect the plan, including specifications, proposed

 81-7    rules, and exemptions from permit requirements the district will

 81-8    allow under Sections 36.117 and 36.121;

 81-9                (3)  identify the time periods and corresponding

81-10    timelines by which the district will seek to provide an amount of

81-11    water sufficient to meet the existing and future water needs within

81-12    the district from existing groundwater resources;

81-13                (4)  include calculations of the following:

81-14                      (A)  the existing total usable amount of

81-15    groundwater in the district;

81-16                      (B)  the amount of groundwater being used within

81-17    the district on an annual basis;

81-18                      (C)  the estimated annual amount of recharge, if

81-19    any, to the groundwater resources within the district; and

81-20                      (D)  the projected future water supply and demand

81-21    for water within the district; and

81-22                (5)  address water supply needs in a manner that is

81-23    consistent with the state water plan [for the most efficient use of

81-24    the groundwater, for controlling and preventing waste of

81-25    groundwater, and for controlling and preventing subsidence.  The

81-26    plan may be reviewed annually but must be reviewed by the board at

81-27    least once every five years].

81-28          (c)  [The district shall specify in the management plan, in

81-29    as much detail as possible, the acts, procedures, performance, and

 82-1    avoidance that are or may be necessary to effect the plan,

 82-2    including specifications and proposed rules.]  The district shall

 82-3    adopt rules necessary to implement the management plan.

 82-4          (d)  The board shall adopt amendments to the management plan

 82-5    as necessary.  Amendments to the management plan shall be adopted

 82-6    after notice and hearing and shall otherwise comply with the

 82-7    requirements of this section.

 82-8          Sec. 36.1072.  COMMISSION REVIEW AND APPROVAL OF MANAGEMENT

 82-9    PLAN.  (a)  The district shall, not later than one year after the

82-10    creation of the district or, if the district required confirmation,

82-11    after the election confirming the district's creation, submit [file

82-12    a copy of] the management plan required under Section 36.1071 to

82-13    [and the rules with] the commission for review and approval.

82-14          (b)  If a management plan complies with the requirements of

82-15    Section 36.1071, the commission, in consultation with the Texas

82-16    Water Development Board, shall grant approval of the plan.  The

82-17    commission may determine that conditions justify waiver of the

82-18    requirements under Section 36.1071(b)(5).  A management plan

82-19    developed under Section 36.1071 takes effect on approval by the

82-20    commission.

82-21          (c)  The board may review the plan annually and must review

82-22    and readopt the plan with or without revisions at least once every

82-23    five years.

82-24          (d)  If the commission does not approve the management plan

82-25    after notice and hearing, the commission shall provide to the

82-26    district, in writing, the reasons for its action.  Not later than

82-27    the 180th day after the date a district receives notice that its

82-28    management plan has not been approved, the district may submit a

82-29    revised management plan for review and approval.  The commission

 83-1    shall not take enforcement action against a district under

 83-2    Subchapter I until the later of the expiration of the 180-day

 83-3    period or the date the commission has taken final action

 83-4    disapproving a revised management plan.

 83-5          Sec. 36.1073.  AMENDMENT TO MANAGEMENT PLAN.  Any amendment

 83-6    to the management plan shall be submitted to the commission within

 83-7    60 days following adoption of the amendment by the board.  The

 83-8    commission shall review and approve any amendment which

 83-9    substantially affects the management plan in accordance with the

83-10    procedures established under Section 36.1072.

83-11          SECTION 3.42.  Subsection (a), Section 36.108, Water Code, is

83-12    amended to read as follows:

83-13          (a)  If two or more districts are located within the

83-14    boundaries of the same management area, each district shall prepare

83-15    a comprehensive management plan as required by Section 36.1071

83-16    [36.107] covering that district's respective territory.  On

83-17    completion of the plan, each district shall forward a copy of the

83-18    new revised management plan to the other districts in the

83-19    management area.

83-20          SECTION 3.43.  Section 36.113, Water Code, is amended to read

83-21    as follows:

83-22          Sec. 36.113.  PERMITS FOR WELLS.  (a)  A district shall

83-23    require permits for the drilling, equipping, or completing of

83-24    wells[,] or for substantially altering the size of wells or well

83-25    pumps.

83-26          (b)  A district shall require that an application for a

83-27    permit be in writing and sworn to.

83-28          (c)  A district may require that the following be included in

83-29    the permit application:

 84-1                (1)  the name and mailing address of the applicant and

 84-2    the owner of the land on which the well will be located;

 84-3                (2)  if the applicant is other than the owner of the

 84-4    property, documentation establishing the applicable authority to

 84-5    construct and operate a well for the proposed use;

 84-6                (3)  a statement of the nature and purpose of the

 84-7    proposed use and the amount of water to be used for each purpose;

 84-8                (4)  a water conservation plan or a declaration that

 84-9    the applicant will comply with the district's conservation plan;

84-10                (5)  the location of each well and the estimated rate

84-11    at which water will be withdrawn; and

84-12                (6)  if the proposed use is irrigation:

84-13                      (A)  a description of the land to be irrigated;

84-14                      (B)  a description of the crops for which

84-15    irrigation is proposed; and

84-16                      (C)  an estimate of the total land to be

84-17    irrigated on an annual basis.

84-18          (d)  In granting a permit, the district shall consider

84-19    whether:

84-20                (1)  the application conforms to the requirements

84-21    prescribed by this chapter and is accompanied by the prescribed

84-22    fees;

84-23                (2)  the proposed use of water unreasonably affects

84-24    existing groundwater and surface water resources;

84-25                (3)  the proposed use of water contemplates the

84-26    dedication of water to any beneficial use;

84-27                (4)  the proposed use of water is consistent with the

84-28    district's approved water management plan; and

84-29                (5)  the applicant has provided evidence that

 85-1    reasonable diligence will be used to avoid waste and achieve water

 85-2    conservation.

 85-3          (e)  Permits may be issued subject to the rules promulgated

 85-4    by the district and subject to terms and provisions with reference

 85-5    to the drilling, equipping, completion, or alteration of wells or

 85-6    pumps that may be necessary to [conserve the groundwater,] prevent

 85-7    waste and achieve water conservation, minimize as far as

 85-8    practicable the drawdown of the water table or the reduction of

 85-9    artesian pressure, lessen interference between wells, or control

85-10    and prevent subsidence.

85-11          (f)  A district may require that changes in the withdrawal

85-12    and use of groundwater under a permit may not be made without the

85-13    prior approval of a permit amendment issued by the district.

85-14          SECTION 3.44.  Subchapter D, Chapter 36, Water Code, is

85-15    amended by adding Section 36.1131 to read as follows:

85-16          Sec. 36.1131.  REQUIRED ELEMENTS OF PERMIT.  (a)  A permit

85-17    issued by the district to the applicant under Section 36.113 shall

85-18    state the terms and provisions prescribed by the district.

85-19          (b)  The permit may include:

85-20                (1)  the name and address of the person to whom the

85-21    permit is issued;

85-22                (2)  the location of the well;

85-23                (3)  the date the permit is to expire if no well is

85-24    drilled;

85-25                (4)  a statement of the purpose for which the well is

85-26    to be used;

85-27                (5)  a requirement that the water withdrawn under the

85-28    permit be put to beneficial use at all times;

85-29                (6)  the location of the use of the water  from the 

 86-1    well;

 86-2                (7)  the conditions and restrictions, if any, placed on

 86-3    the rate and amount of withdrawal;

 86-4                (8)  any conservation-oriented methods of drilling and

 86-5    operating prescribed by the district;

 86-6                (9)  a drought contingency plan prescribed by the

 86-7    district; and

 86-8                (10)  other terms and conditions as provided by Section

 86-9    36.113.

86-10          SECTION 3.45.  Subsections (a), (c), (d), and (e), Section

86-11    36.117, Water Code, are amended to read as follows:

86-12          (a)  Unless otherwise specified in a district's management

86-13    plan, a [A] district may not require a permit for:

86-14                (1)  drilling or producing from a well either drilled,

86-15    completed, or equipped so that it is incapable of producing more

86-16    than 25,000 gallons of groundwater a day;

86-17                (2)  the drilling or alteration of the size of a well

86-18    or to restrict the production of a well if the water produced or to

86-19    be produced from the well is used or to be used to supply the

86-20    domestic needs of 10 or fewer households and a person who is a

86-21    member of each household is either the owner of the well, a person

86-22    related to the owner or a member of the owner's household within

86-23    the second degree by consanguinity, or an employee of the owner;

86-24                (3)  the drilling or alteration of the size of a well

86-25    or to restrict the production from the well if the water produced

86-26    or to be produced from the well is used or to be used to provide

86-27    water for feeding livestock and poultry connected with farming,

86-28    ranching, or dairy enterprises;

86-29                (4)  water wells to supply water for hydrocarbon

 87-1    production activities, regardless of whether those wells are

 87-2    producing, that are associated with any well permitted by the

 87-3    Railroad Commission of Texas drilled before September 1, 1985; or

 87-4                (5)  jet wells used for domestic needs.

 87-5          (c)  Unless otherwise specified in a district's management

 87-6    plan, a [The] district shall not deny the owner of a tract of land,

 87-7    or his lessee, who has no well equipped to produce more than 25,000

 87-8    gallons a day on the tract, either a permit to drill a well on his

 87-9    land or the privilege to produce groundwater from his land, subject

87-10    to the rules of the district.

87-11          (d)  Unless otherwise specified in a district's management

87-12    plan, a [A] district may not restrict the production of any well

87-13    equipped to produce 25,000 gallons or less a day.

87-14          (e)  Nothing in this chapter applies to wells drilled for

87-15    oil, gas, sulphur, uranium, or brine, or for core tests, or for

87-16    injection of gas, saltwater, or other fluid, except fresh water, or

87-17    for any other purpose, under permits issued by the Railroad

87-18    Commission of Texas.  Permits issued by the Railroad Commission of

87-19    Texas for an injection well using fresh water for enhanced recovery

87-20    purposes shall comply with the district's management plan.  Unless

87-21    otherwise specified in a district's management plan, a [A] district

87-22    may not require a permit to drill a well to supply water for

87-23    drilling any of these wells permitted by the Railroad Commission of

87-24    Texas.  Any well that ceases to be used for these purposes and is

87-25    then used as an ordinary water well is subject to the rules of the

87-26    district.

87-27          SECTION 3.46.  Section 36.121, Water Code, is amended to read

87-28    as follows:

87-29          Sec. 36.121.  LIMITATION ON RULEMAKING POWER OF DISTRICTS

 88-1    OVER WELLS IN CERTAIN COUNTIES.  Except as provided by Section

 88-2    36.117, unless otherwise specified in a district's management plan,

 88-3    a district that is created under this chapter on or after September

 88-4    1, 1991, shall exempt from regulation under this chapter a well and

 88-5    any water produced or to be produced by a well that is located in a

 88-6    county that has a population of 14,000 or less if the water is to

 88-7    be used solely to supply a municipality that has a population of

 88-8    115,000 or less and the rights to the water produced from the well

 88-9    are owned by a political subdivision that is not a municipality, or

88-10    by a municipality that has a population of 93,000 or less, and that

88-11    purchased, owned, or held rights to the water before the date on

88-12    which the district was created, regardless of the date the well is

88-13    drilled or the water is produced.  The district may not prohibit

88-14    the political subdivision or municipality from transporting

88-15    produced water inside or outside the district's boundaries unless

88-16    otherwise specified in the district's management plan.

88-17          SECTION 3.47.  Subchapter D, Chapter 36, Water Code, is

88-18    amended by adding Sections 36.122 and 36.123 to read as follows:

88-19          Sec. 36.122.  PREFERENCE IN USE OF WATER.  For new wells, a

88-20    district may by rule establish and apply a preference-of-use

88-21    listing for the  district's groundwater, provided that domestic and

88-22    livestock uses and, among municipal uses, public health and safety

88-23    uses receive the highest priority.

88-24          Sec. 36.123.  TECHNICAL ASSISTANCE.  The commission is

88-25    authorized to provide technical assistance to districts during

88-26    their initial operational phase.  Such assistance may include but

88-27    is not limited to demonstrations of how to adopt rules, how to set

88-28    up permitting programs, and how to initiate enforcement actions.

88-29          SECTION 3.48.  Subchapter E, Chapter 36, Water Code, is

 89-1    amended by adding Sections 36.159, 36.160, and 36.161 to read as

 89-2    follows:

 89-3          Sec. 36.159.  MANAGEMENT PLAN FUNDS.  The Texas Water

 89-4    Development Board may allocate funds from the research and planning

 89-5    fund created under Subchapter F, Chapter 15, to a district to

 89-6    conduct initial data collections under this chapter, to develop and

 89-7    implement a long-term management plan under Section 36.1071, and to

 89-8    participate in regional plans that provide for the conjunctive

 89-9    management of surface water and groundwater.

89-10          Sec. 36.160.  FUNDS.  The Texas Water Development Board, the

89-11    commission, and the Parks and Wildlife Department may allocate

89-12    funds to carry out the objectives of this chapter and Chapter 35,

89-13    which include but are not limited to:

89-14                (1)  conducting initial and subsequent studies and

89-15    surveys under Sections 36.106, 36.107, and 36.109;

89-16                (2)  providing appropriate education in affected areas

89-17    identified in Section 35.007 relating to the problems and issues

89-18    concerning water management that may arise;

89-19                (3)  processing priority groundwater management area

89-20    evaluations under this chapter and Chapter 35;

89-21                (4)  providing technical and administrative assistance

89-22    to newly created districts under this chapter and Chapter 35;

89-23                (5)  covering the costs of newspaper notices required

89-24    under Sections 35.009 and 36.014 and failed elections in accordance

89-25    with Sections 35.014(c), 36.017(h), and 36.019; and

89-26                (6)  providing for assistance from the Parks and

89-27    Wildlife Department to the Texas Water Development Board or a

89-28    district for the purpose of assessing fish and wildlife resource

89-29    habitat that would be affected by a springflow reduction.

 90-1          Sec. 36.161.  ELIGIBILITY FOR FUNDING. (a)  Only those

 90-2    districts in substantial compliance with the requirements of this

 90-3    chapter shall be eligible for state funds authorized by Sections

 90-4    36.159 and 36.160 and Subchapter L and for funds available from the

 90-5    Texas Water Development Board under Chapters 15, 16, and 17.

 90-6          (b)  The Texas Water Development Board may, after notice and

 90-7    hearing, discontinue funding described in Subsection (a) if the

 90-8    district is found not to be in substantial compliance with the

 90-9    provisions of this chapter.

90-10          (c)  The Texas Water Development Board, when considering a

90-11    discontinuance under Subsection (b), shall give written notice of

90-12    the hearing to the district at least 20 days before the date set

90-13    for the hearing.  The hearing shall be conducted in accordance with

90-14    Chapter 2001, Government Code, or the rules of the respective

90-15    agency.  General notice of the hearing shall be given in accordance

90-16    with the rules of the agency.

90-17          SECTION 3.49.  Subchapter G, Chapter 36, Water Code, is

90-18    amended by adding Section 36.206 to read as follows:

90-19          Sec. 36.206.  DISTRICT FEES.  (a)  A board may annually set

90-20    user and standby fees.  Such fees shall be set as necessary to

90-21    cover the maintenance and operating expenses of the district and

90-22    the principal of and interest on bonds issued by the district,

90-23    provided that funds received from the collection of penalties under

90-24    Section 36.1021 shall be taken into account.

90-25          (b)  The rate of fees set for agricultural uses shall be no

90-26    more than 20 percent of the rate applied to municipal uses.

90-27          (c)  A temporary board may set user fees to pay for the

90-28    creation and initial operation of a district.

90-29          SECTION 3.50.  Subchapter I, Chapter 36, Water Code, is

 91-1    amended to read as follows:

 91-2      SUBCHAPTER I.  PERFORMANCE REVIEW AND DISSOLUTION [OF DISTRICT]

 91-3          Sec. 36.301.  FAILURE TO SUBMIT A MANAGEMENT PLAN.  If a

 91-4    board fails to submit a management plan or to receive approval of

 91-5    its management plan under Section 36.1072 or fails to submit or

 91-6    receive approval of an amendment to the management plan under

 91-7    Section 36.1073, the commission shall take appropriate action under

 91-8    Section 36.303.

 91-9          Sec. 36.302.  DETERMINATION OF WHETHER DISTRICT IS

91-10    OPERATIONAL.  (a)  The commission shall make a determination of

91-11    whether a district is actively engaged in achieving the objectives

91-12    of the district's management plan based on an audit of the

91-13    district's performance under the plan.  The commission shall

91-14    conduct such audits following the first anniversary of the initial

91-15    approval of the plan by the commission under Section 36.1072.  The

91-16    commission by rule shall establish a schedule for the audit of

91-17    districts under this section.

91-18          (b)  If the commission finds under Subsection (a) that the

91-19    district is not operational, the commission shall take appropriate

91-20    action under Section 36.303.

91-21          Sec. 36.303.  ACTION BY COMMISSION.  (a)  After notice and

91-22    hearing, the commission may take any action the commission deems

91-23    appropriate to enforce compliance with any rule or order of the

91-24    commission or any provisions of this chapter, including:

91-25                (1)  issuing an order requiring the district to take

91-26    certain actions or to refrain from taking certain actions;

91-27                (2)  dissolving the board in accordance with Sections

91-28    36.305 and 36.307;

91-29                (3)  removing the district's taxing authority; or

 92-1                (4)  dissolving the district in accordance with

 92-2    Sections 36.304, 36.305, and 36.308.

 92-3          (b)  In addition to actions identified under Subsection (a),

 92-4    the commission may recommend to the legislature actions the

 92-5    commission deems necessary to accomplish comprehensive management

 92-6    in the district.

 92-7          Sec. 36.304 [36.301].  DISSOLUTION OF DISTRICT.  (a)  The

 92-8    [After notice and hearing, the] commission may dissolve a district

 92-9    that:

92-10                (1)  is not operational, as determined under Section

92-11    36.302 [has been inactive for a period of three consecutive years];

92-12    and

92-13                (2)  has no outstanding bonded indebtedness.

92-14          (b)  A district composed of territory entirely within one

92-15    county may be dissolved even if the district [it] has outstanding

92-16    indebtedness that matures after the year in which the district is

92-17    dissolved, whereupon the commissioners court shall levy and collect

92-18    taxes on all taxable property in the district in an amount

92-19    sufficient to pay the principal of and interest on the indebtedness

92-20    when due.  The taxes shall be levied and collected in the same

92-21    manner as county taxes.

92-22          [(c)  A district is considered active if:]

92-23                [(1)  the district has a board as required by

92-24    Subchapter D;]

92-25                [(2)  the board holds regularly scheduled meetings and

92-26    has on file minutes of its meetings;]

92-27                [(3)  the district has developed and filed with the

92-28    commission a management plan for the district;]

92-29                [(4)  the district has copies of drillers' logs on

 93-1    file;]

 93-2                [(5)  the district has on file well permits issued by

 93-3    the district; and]

 93-4                [(6)  the district has on file annual district audits.]

 93-5          Sec. 36.305 [36.302].  NOTICE OF HEARING FOR DISSOLUTION OF

 93-6    BOARD OR DISTRICT.  (a)  The commission shall give notice of the

 93-7    [dissolution] hearing for dissolution of a district or of a board

 93-8    which briefly describes the reasons for the proceeding.

 93-9          (b)  The notice shall be published once each week for two

93-10    consecutive weeks before the day of hearing in a [some] newspaper

93-11    having general circulation in the county or counties in which the

93-12    district is located.  The first publication shall be 30 days before

93-13    the day of the hearing.

93-14          (c)  The commission shall give notice of the hearing by first

93-15    class mail addressed to the directors of the district according to

93-16    the last record on file with the executive director.

93-17          Sec. 36.306 [36.303].  INVESTIGATION.  The executive director

93-18    shall investigate the facts and circumstances of any violations of

93-19    any rule or order of the commission or any provisions of this

93-20    chapter and shall prepare and file a written report with the

93-21    commission and district and include any actions the executive

93-22    director believes the commission should take under Section 36.303.

93-23          Sec. 36.307.  ORDER OF DISSOLUTION OF BOARD.  If the

93-24    commission enters an order to dissolve the board, the commission

93-25    shall notify the county commissioners court of each county which

93-26    contains territory in the district and the commission shall provide

93-27    that temporary directors be appointed under Section 36.016 to serve

93-28    until an election for a new board can be held under Section 36.017,

93-29    provided, however, that district confirmation shall not be required

 94-1    for continued existence of the district and shall not be an issue

 94-2    in the election  [the district to be dissolved and the result of

 94-3    the investigation shall be included in a written report].

 94-4          [Sec. 36.304.  ORDER OF DISSOLUTION.  The commission may

 94-5    enter an order dissolving the district at the conclusion of the

 94-6    hearing if it finds that the district has performed none of the

 94-7    functions for which it was created for a period of three

 94-8    consecutive years before the day of the proceeding and that the

 94-9    district has no outstanding bonded indebtedness.]

94-10          Sec. 36.308 [36.305].  CERTIFIED COPY OF ORDER.  The

94-11    commission shall file a certified copy of the order of dissolution

94-12    of the district in the deed records of the county or counties in

94-13    which the district is located.  If the district was created by a

94-14    special Act of the legislature, the commission shall file a

94-15    certified copy of the order of dissolution with the secretary of

94-16    state.

94-17          Sec. 36.309 [36.306].  APPEALS.  [(a)]  Appeals from any [a]

94-18    commission order [dissolving a district] shall be filed and heard

94-19    in the district court of Travis County in accordance with Chapter

94-20    2001, Government Code [any of the counties in which the land is

94-21    located].

94-22          [(b)  The trial on appeal shall be de novo and the

94-23    substantial evidence rule shall not apply.]

94-24          Sec. 36.310 [36.307].  ASSETS ESCHEAT TO STATE.  Upon the

94-25    dissolution of a district by the commission, all assets of the

94-26    district shall escheat to the State of Texas.  The assets shall be

94-27    administered by the comptroller [state treasurer] and shall be

94-28    disposed of in the manner provided by Chapter 72, Property Code.

94-29          SECTION 3.51.  Subsection (b), Section 36.325, Water Code, is

 95-1    amended to read as follows:

 95-2          (b)  The petition must be signed by:

 95-3                (1)  a majority of the landowners in the territory;

 95-4                (2)  at least 50 landowners if the number of landowners

 95-5    is more than 50; or

 95-6                (3)  the commissioners court of the county in which the

 95-7    area is located if the area is identified as a priority groundwater

 95-8    management [critical] area or includes the entire county.  The

 95-9    petition must describe the land by legal description or by metes

95-10    and bounds or by lot and block number if there is a recorded plat

95-11    of the area to be included in the district.

95-12          SECTION 3.52.  Section 36.331, Water Code, is amended to read

95-13    as follows:

95-14          Sec. 36.331.  ANNEXATION OF NONCONTIGUOUS TERRITORY.  Land

95-15    not contiguous to the existing boundaries of a district may not be

95-16    added to or annexed to a district unless the land is located either

95-17    within the same management area, priority groundwater management

95-18    [critical] area, or a groundwater subdivision designated by the

95-19    commission or its predecessors.

95-20          SECTION 3.53.  Chapter 36, Water Code, is amended by adding

95-21    Subchapter L to read as follows:

95-22         SUBCHAPTER L.  GROUNDWATER DISTRICT LOAN ASSISTANCE FUND

95-23          Sec. 36.371.  GROUNDWATER DISTRICT LOAN ASSISTANCE FUND.

95-24    (a)  The groundwater district loan assistance fund is created, to

95-25    be funded by direct appropriation and by the Texas Water

95-26    Development Board, at its discretion, from the water assistance

95-27    fund.

95-28          (b)  Repayments of loans shall be deposited in the water

95-29    assistance fund.

 96-1          Sec. 36.372.  FINANCIAL ASSISTANCE.  (a)  The loan fund may

 96-2    be used by the Texas Water Development Board to provide loans to

 96-3    newly confirmed districts to pay for their creation and initial

 96-4    operations.

 96-5          (b)  The Texas Water Development Board shall establish rules

 96-6    for the use and administration of the loan fund.

 96-7          Sec. 36.373.  APPLICATION FOR ASSISTANCE.  (a)  In an

 96-8    application to the Texas Water Development Board for financial

 96-9    assistance from the loan fund, the applicant shall include:

96-10                (1)  the name of the district and its board members;

96-11                (2)  a citation of the law under which the district

96-12    operates and was created;

96-13                (3)  a description of the initial operations;

96-14                (4)  the total start-up cost of the initial operations;

96-15                (5)  the amount of state financial assistance

96-16    requested;

96-17                (6)  the plan for repaying the total cost of the loan;

96-18    and

96-19                (7)  any other information the Texas Water Development

96-20    Board may require to perform its duties and protect the public

96-21    interest.

96-22          (b)  The Texas Water Development Board may not accept an

96-23    application for a loan from the loan fund unless it is submitted in

96-24    affidavit form by the applicant's board.  The Texas Water

96-25    Development Board shall prescribe the affidavit form in its rules.

96-26          (c)  The rules shall not restrict or prohibit the Texas Water

96-27    Development Board from requiring additional factual material from

96-28    an applicant.

96-29          Sec. 36.374.  APPROVAL OF APPLICATION.  The Texas Water

 97-1    Development Board, by resolution, may approve an application if it

 97-2    finds that:

 97-3                (1)  granting financial assistance to the applicant

 97-4    will serve the public interest; and

 97-5                (2)  the revenue pledged by the applicant from district

 97-6    taxes and fees and other sources will be sufficient to meet all the

 97-7    obligations assumed by the applicant.

 97-8          SECTION 3.54.  Subsection (g), Section 151.318, Tax Code, is

 97-9    amended to read as follows:

97-10          (g)  Each person engaged in manufacturing, processing,

97-11    fabricating, or repairing tangible personal property for ultimate

97-12    sale is entitled to a refund or a reduction in the amount of tax

97-13    imposed by this chapter as provided by Subsection (h) for the

97-14    purchase of machinery, equipment, and replacement parts or

97-15    accessories with a useful life in excess of six months if the

97-16    equipment is:

97-17                (1)  used or consumed in or during the actual

97-18    manufacturing, processing, fabrication, or repair of tangible

97-19    personal property for ultimate sale, and the use or consumption of

97-20    the property is necessary or essential to the manufacturing,

97-21    processing, fabrication, or repair operation, or to a pollution

97-22    control process; or

97-23                (2)  specifically installed to:

97-24                      (A)  reduce water use and wastewater flow volumes

97-25    from the manufacturing, processing, fabrication, or repair

97-26    operation;

97-27                      (B)  reuse and recycle wastewater streams

97-28    generated within the manufacturing, processing, fabrication, or

97-29    repair operation; or

 98-1                      (C)  treat wastewater from another industrial or

 98-2    municipal source for the purpose of replacing existing freshwater

 98-3    sources in the manufacturing, processing, fabrication, or repair

 98-4    operation.

 98-5          SECTION 3.55.  (a)  Sections 35.010 and 35.011, Water Code,

 98-6    are repealed.

 98-7          (b)  Section 5.02, Chapter 133, Acts of the 69th Legislature,

 98-8    Regular Session, 1985, is repealed.

 98-9          SECTION 3.56.  (a)  In this section, "district" means a

98-10    groundwater conservation district created under Section 52, Article

98-11    III, or Section 59, Article XVI, Texas Constitution, that has the

98-12    authority to regulate the spacing of water wells, the production

98-13    from water wells, or both.

98-14          (b)  Notwithstanding the time limitation under Subsection

98-15    (a), Section 36.1072, Water Code, as added by this Act, and

98-16    notwithstanding any provision to the contrary in prior law, a

98-17    district which was created or, if the district required a

98-18    confirmation election, a district whose creation was confirmed

98-19    before the effective date of this Act shall submit a management

98-20    plan for approval under Section 36.1072, Water Code, as added by

98-21    this Act, to the Texas Natural Resource Conservation Commission not

98-22    later than one year after the effective date of this Act.

98-23          SECTION 3.57.  An area designated as a critical area under

98-24    Chapter 35, Water Code, as it existed before the effective date of

98-25    this Act, or under other prior law, shall be known and referred to

98-26    as a priority groundwater management area on or after the effective

98-27    date of this Act.

98-28          SECTION 3.58.  Not later than September 1, 1998, the Texas

98-29    Natural Resource Conservation Commission must, under Chapter 35,

 99-1    Water Code, as amended by this Act, make all designations of

 99-2    priority groundwater management areas for which critical area

 99-3    reports were required to have been completed before the effective

 99-4    date of this Act under Section 35.007, Water Code, as that section

 99-5    existed immediately before the effective date of this Act.

 99-6           ARTICLE 4.  FINANCIAL ASSISTANCE TO LOCAL GOVERNMENTS

 99-7          SECTION 4.01.  Section 15.431, Water Code, is amended by

 99-8    amending Subsection (d) and adding Subsection (g) to read as

 99-9    follows:

99-10          (d)  Money appropriated by the legislature to be maintained

99-11    as principal in the fund, $10 million of the money transferred to

99-12    that fund by H.B. No. 2, Acts of the 69th Legislature, Regular

99-13    Session, 1985, and half of the money earned as interest on the

99-14    money held as principal in the agricultural trust fund shall be

99-15    maintained as principal.  Money maintained as principal in the

99-16    agricultural trust fund may [not] be used by the board to make

99-17    conservation loans to borrower districts and loans to lender

99-18    districts for the purposes listed in Section 17.895 of this code.

99-19    Loans and conservation loans made under this subchapter are subject

99-20    to the provisions of Sections 17.896 through 17.903 of this code.

99-21    Repayments of principal and interest on loans and conservation

99-22    loans made under this subchapter shall be deposited in the

99-23    agricultural trust fund [spent for any purpose].

99-24          (g)  In this section, "borrower district," "conservation

99-25    loan," "individual borrower," "lender district," and "loan" have

99-26    the meanings assigned those terms by Section 17.871 of this code.

99-27          SECTION 4.02.  Section 16.189, Water Code, is amended to read

99-28    as follows:

99-29          Sec. 16.189.  LEASE PAYMENTS.  In leasing a state facility

 100-1   for a term of years, the board shall require [annual] payments that

 100-2   will recover over the lease period not less than the total of:

 100-3               (1)  all [the annual] principal and interest

 100-4   requirements applicable to the debt incurred by the state in

 100-5   acquiring the facility; and

 100-6               (2)  the state's [annual] cost for operation,

 100-7   maintenance, and rehabilitation of the facility.

 100-8         SECTION 4.03.  Chapter 17, Water Code, is amended by adding

 100-9   Subchapter L to read as follows:

100-10         SUBCHAPTER L.  WATER FINANCIAL ASSISTANCE BOND PROGRAM

100-11         Sec. 17.951.  DEFINITIONS.  In this subchapter:

100-12               (1)  "Fund" means the Texas Water Development Fund II.

100-13               (2)  "Resolution" means any resolution or order

100-14   approved by the board authorizing the issuance of water financial

100-15   assistance bonds.

100-16         Sec. 17.952.  ISSUANCE OF WATER FINANCIAL ASSISTANCE BONDS.

100-17   The board by resolution may provide for the issuance of water

100-18   financial assistance bonds, which shall be general obligation bonds

100-19   of the state, in an aggregate principal amount not to exceed the

100-20   principal amount authorized to be issued by Section 49-d-8, Article

100-21   III, Texas Constitution.

100-22         Sec. 17.953.  CONDITIONS FOR ISSUANCE OF WATER FINANCIAL

100-23   ASSISTANCE BONDS.  (a)  Water financial assistance bonds may be

100-24   issued as various series and issues.

100-25         (b)  Water financial assistance bonds may mature, serially or

100-26   otherwise, not later than 50 years after the date on which they are

100-27   issued.

100-28         (c)  Water financial assistance bonds may be issued as bonds,

100-29   notes, or other obligations as permitted by law and may be in the

 101-1   form and denominations and be issued in the manner and under the

 101-2   terms, conditions, and details as provided by resolution.

 101-3         (d)  Water financial assistance bonds may be sold at public

 101-4   or private sale at a price or prices and on terms determined by the

 101-5   board.

 101-6         (e)  Water financial assistance bonds shall be signed and

 101-7   executed as provided by resolution.

 101-8         (f)  Water financial assistance bonds may bear no interest or

 101-9   bear interest at a rate or rates determined in accordance with law.

101-10         (g)  Rates of interest on water financial assistance bonds

101-11   may be fixed, variable, floating, adjustable, or otherwise, as

101-12   determined by the board or determined pursuant to any contractual

101-13   arrangements approved by the board.  The resolution may provide for

101-14   the payment of interest at any time or the periodic determination

101-15   of interest rates or interest rate periods.

101-16         Sec. 17.954.  BOND ENHANCEMENT AGREEMENTS; PAYMENT OF

101-17   EXPENSES.  (a)  The board at any time and from time to time may

101-18   enter into one or more bond enhancement agreements that the board

101-19   determines to be necessary or appropriate to place the obligation

101-20   of the board, as represented by the water financial assistance

101-21   bonds, in whole or in part, on the interest rate, currency, cash

101-22   flow, or other basis desired by the board.  A bond enhancement

101-23   agreement is an agreement for professional services and shall

101-24   contain the terms and conditions and be for the period that the

101-25   board approves.

101-26         (b)  The fees and expenses of the board in connection with

101-27   the issuance of water financial assistance bonds and the providing

101-28   of financial assistance to political subdivisions may be paid from

101-29   money in the fund, provided that any payments due from the board

 102-1   under a bond enhancement agreement, other than fees and expenses,

 102-2   that relate to the payment of debt service on water financial

 102-3   assistance bonds constitute payments of principal of and interest

 102-4   on the water financial assistance bonds.

 102-5         (c)  Bond enhancement agreements may include, on terms and

 102-6   conditions approved by the board, interest rate swap agreements;

 102-7   currency swap agreements; forward payment conversion agreements;

 102-8   agreements providing for payments based on levels of or changes in

 102-9   interest rates or currency exchange rates; agreements to exchange

102-10   cash flows or a series of payments; agreements, including options,

102-11   puts, or calls, to hedge payment, currency, rate, spread, or other

102-12   exposure; or any other agreement that the board determines to be

102-13   necessary to further enhance the marketability, security, or

102-14   creditworthiness of water financial assistance bonds.

102-15         Sec. 17.955.  PERSONS DESIGNATED TO ACT AS AGENTS OF BOARD.

102-16   (a)  In the resolution the board may delegate authority to one or

102-17   more officers, employees, or agents designated by the board to act

102-18   on behalf of the board during the time any series of water

102-19   financial assistance bonds are outstanding to:

102-20               (1)  fix dates, prices, interest rates, amortization

102-21   schedules, redemption features, and interest payment periods;

102-22               (2)  perform any duties and obligations of the board

102-23   under a bond enhancement agreement; and

102-24               (3)  perform other procedures specified in the

102-25   resolution.

102-26         (b)  The person designated by the board may adjust the

102-27   interest on water financial assistance bonds and perform all duties

102-28   described in a bond enhancement agreement as necessary to permit

102-29   the water financial assistance bonds to be sold or resold at par in

 103-1   conjunction with secondary market transactions.

 103-2         Sec. 17.956.  TEXAS WATER DEVELOPMENT FUND II.  The fund is a

 103-3   special fund in the state treasury, and all water financial

 103-4   assistance bond proceeds shall be deposited in the state treasury

 103-5   to the credit of the fund.  The fund shall contain a "state

 103-6   participation account," an "economically distressed areas program

 103-7   account," and a "financial assistance account," and proceeds from

 103-8   the sale of water financial assistance bonds issued for the purpose

 103-9   of providing financial assistance to political subdivisions shall

103-10   be credited to such accounts as provided by resolution by the

103-11   board.  By resolution, the board may create additional accounts

103-12   within the fund as the board determines are necessary or convenient

103-13   for the administration of the fund.

103-14         Sec. 17.957.  STATE PARTICIPATION ACCOUNT.  (a)  The Texas

103-15   Water Development Fund II state participation account, referred to

103-16   as the "state participation account," is an account established

103-17   within the fund in the state treasury.  Transfers shall be made

103-18   from this account as provided by this subchapter.

103-19         (b)  The state participation account is composed of:

103-20               (1)  money and assets attributable to water financial

103-21   assistance bonds designated by the board as issued for projects

103-22   described in Section 16.131;

103-23               (2)  money from the sale, transfer, or lease of a

103-24   project described in Subdivision (1) that was acquired,

103-25   constructed, reconstructed, developed, or enlarged with money from

103-26   the state participation account;

103-27               (3)  payments received under a bond enhancement

103-28   agreement with respect to water financial assistance bonds

103-29   designated by the board as issued for projects described in Section

 104-1   16.131;

 104-2               (4)  investment income earned on money on deposit in

 104-3   the state participation account; and

 104-4               (5)  any other funds, regardless of their source, that

 104-5   the board directs be deposited to the credit of the state

 104-6   participation account.

 104-7         (c)  Money on deposit in the state participation account may

 104-8   be used by the board for projects described in Section 16.131 in

 104-9   the manner that the board determines necessary or convenient for

104-10   the administration of the fund.

104-11         Sec. 17.958.  ECONOMICALLY DISTRESSED AREAS PROGRAM ACCOUNT.

104-12   (a)  The Texas Water Development Fund II economically distressed

104-13   areas program account, referred to as the "economically distressed

104-14   areas program account," is an account established within the fund

104-15   in the state treasury.  Transfers shall be made from this account

104-16   as provided by this subchapter.

104-17         (b)  The economically distressed areas program account is

104-18   composed of:

104-19               (1)  money and assets attributable to water financial

104-20   assistance bonds designated by the board as issued for projects

104-21   described in Subchapter K;

104-22               (2)  money provided by the federal government, the

104-23   state, political subdivisions, and private entities for the purpose

104-24   of paying debt service on water financial assistance bonds issued

104-25   for purposes provided by Subchapter K;

104-26               (3)  payments received under a bond enhancement

104-27   agreement with respect to water financial assistance bonds

104-28   designated by the board as issued for purposes provided by

104-29   Subchapter K;

 105-1               (4)  investment income earned on money on deposit in

 105-2   the economically distressed areas program account; and

 105-3               (5)  any other funds, regardless of their source, that

 105-4   the board directs be deposited to the credit of the economically

 105-5   distressed areas program account.

 105-6         (c)  Money on deposit in the economically distressed areas

 105-7   program account may be used by the board for purposes provided by

 105-8   Subchapter K in the manner that the board determines necessary or

 105-9   convenient for the administration of the fund.

105-10         Sec. 17.959.  FINANCIAL ASSISTANCE ACCOUNT.  (a)  The Texas

105-11   Water Development Fund II water financial assistance account,

105-12   referred to as the "financial assistance account," is an account

105-13   established within the fund in the state treasury.  Transfers shall

105-14   be made from this account as provided by this subchapter.

105-15         (b)  The financial assistance account is composed of:

105-16               (1)  money and assets attributable to water financial

105-17   assistance bonds designated by the board as issued for purposes

105-18   described in Section 49-d-8, Article III, Texas Constitution, other

105-19   than for purposes described in Sections 17.957 and 17.958;

105-20               (2)  payments received under a bond enhancement

105-21   agreement with respect to water financial assistance bonds

105-22   designated by the board as issued for purposes described in Section

105-23   49-d-8, Article III, Texas Constitution, other than for purposes

105-24   described in Sections 17.957 and 17.958;

105-25               (3)  investment income earned on money on deposit in

105-26   the financial assistance account; and

105-27               (4)  any other funds, regardless of their source, that

105-28   the board directs be deposited to the credit of the financial

105-29   assistance account.

 106-1         (c)  Money on deposit in the financial assistance account may

 106-2   be used by the board for any one or more of the purposes described

 106-3   in Section 49-d-8, Article III, Texas Constitution, other than for

 106-4   purposes described in Sections 17.957 and 17.958, in the manner

 106-5   that the board determines necessary or convenient for the

 106-6   administration of the fund.

 106-7         Sec. 17.960.  BOND RESOLUTIONS.  (a)  In the resolution, the

 106-8   board may make additional covenants with respect to water financial

 106-9   assistance bonds and may provide for:

106-10               (1)  the flow of funds;

106-11               (2)  the establishment of accounts and subaccounts

106-12   within the fund that the board determines are necessary or

106-13   convenient for the administration of the fund;

106-14               (3)  at the discretion of the board, the payment of

106-15   fees and expenses of the board in connection with providing

106-16   financial assistance to political subdivisions as the board

106-17   determines are necessary or convenient for the administration of

106-18   the fund;

106-19               (4)  the maintenance, investment, and management of

106-20   money within the fund and any accounts established by resolution by

106-21   the board; and

106-22               (5)  any other provisions and covenants that the board

106-23   determines are necessary or convenient for the administration of

106-24   the fund.

106-25         (b)  The board may invest and reinvest money in the fund and

106-26   any account therein in any obligations or securities as provided by

106-27   the resolution or by rule adopted by the board.

106-28         (c)  The board may adopt and have executed any other

106-29   proceedings, agreements, or trust agreements or instruments

 107-1   necessary and convenient in the issuance of water financial

 107-2   assistance bonds, including, without limitation, bond enhancement

 107-3   agreements.

 107-4         Sec. 17.961.  TRANSFERS TO REVOLVING FUNDS.  (a)  In order to

 107-5   implement and administer a revolving loan program established under

 107-6   Title VI of the Federal Water Pollution Control Act (33 U.S.C.

 107-7   Section 1381 et seq.), the board may direct the comptroller to

 107-8   transfer amounts from the financial assistance account to the state

 107-9   water pollution control revolving fund created by Section 15.601 to

107-10   provide financial assistance pursuant to this subchapter.

107-11         (b)  In order to implement and administer a revolving loan

107-12   program established by any other federal legislation, including,

107-13   without limitation, Title XIV of the federal Public Health Service

107-14   Act, or any federal agency program under which an additional state

107-15   revolving fund, as defined in Section 15.602, has been established,

107-16   the board may direct the comptroller to transfer amounts from the

107-17   financial assistance account to such additional state revolving

107-18   fund to provide financial assistance pursuant to this subchapter.

107-19         (c)  The board shall use the state water pollution control

107-20   revolving fund in accordance with Section 15.604(a)(4) and Section

107-21   603(d)(4), Federal Water Pollution Control Act (33 U.S.C. Section

107-22   1383), as a source of revenue to be deposited in accordance with

107-23   this subchapter for the payment of principal and interest on water

107-24   financial assistance bonds issued by the board, the proceeds of

107-25   which are deposited into the state water pollution control

107-26   revolving fund, and to make payments under a bond enhancement

107-27   agreement with respect to principal or interest on the water

107-28   financial assistance bonds.

107-29         (d)  In the event amounts are transferred to any additional

 108-1   state revolving fund, as defined in Section 15.602, pursuant to

 108-2   Subsection (b), the board shall, to the extent permitted by the

 108-3   federal legislation or federal agency program under which such

 108-4   additional state revolving fund was established, use the additional

 108-5   state revolving fund as a source of revenue to be deposited in

 108-6   accordance with this subchapter for the payment of principal and

 108-7   interest on water financial assistance bonds issued by the board,

 108-8   the proceeds of which are deposited into the additional state

 108-9   revolving fund, and to make payments under a bond enhancement

108-10   agreement with respect to principal or interest on the water

108-11   financial assistance bonds.

108-12         Sec. 17.962.  STATE APPROVALS.  (a)  Water financial

108-13   assistance bonds may not be issued under this subchapter unless

108-14   such issuance has been reviewed and approved by the bond review

108-15   board.

108-16         (b)  The proceedings relating to the water financial

108-17   assistance bonds issued under this subchapter are subject to review

108-18   and approval by the attorney general in the same manner and with

108-19   the same effect as provided by Chapter 656, Acts of the 68th

108-20   Legislature, Regular Session, 1983 (Article 717q, Vernon's Texas

108-21   Civil Statutes).

108-22         (c)  After approval by the attorney general of the

108-23   proceedings relating to water financial assistance bonds issued

108-24   under this subchapter, registration of the proceedings by the

108-25   comptroller, and delivery of the water financial assistance bonds

108-26   to the purchasers, the water financial assistance bonds are

108-27   incontestable and constitute general obligations of the state.

108-28         Sec. 17.963.  PAYMENT OF BOARD OBLIGATIONS.  (a)  The board

108-29   shall cooperate with the comptroller to develop procedures for the

 109-1   payment of principal and interest on water financial assistance

 109-2   bonds and any obligation under a bond enhancement agreement, as the

 109-3   same become due and owing.

 109-4         (b)  If there is not enough money in any account of the fund

 109-5   available to pay the principal and interest on water financial

 109-6   assistance bonds issued for such account, including money to make

 109-7   payments by the board under a bond enhancement agreement with

 109-8   respect to principal or interest on such water financial assistance

 109-9   bonds, the board shall notify the comptroller of such occurrence,

109-10   and the comptroller shall transfer out of the first money coming

109-11   into the state treasury not otherwise appropriated by the

109-12   constitution the amount required to pay the obligations of the

109-13   board that are due and owing.  The comptroller shall make the

109-14   transfers required by Section 49-d-8, Article III, Texas

109-15   Constitution, and this subchapter in the manner specified in the

109-16   resolution.

109-17         Sec. 17.964.  ELIGIBLE SECURITY.  Water financial assistance

109-18   bonds are eligible to secure deposits of public funds of the state

109-19   and political subdivisions of the state.  Water financial

109-20   assistance bonds are lawful and sufficient security for deposits to

109-21   the extent of their face value.

109-22         Sec. 17.965.  LEGAL INVESTMENTS.  Water financial assistance

109-23   bonds are legal and authorized investments for:

109-24               (1)  banks;

109-25               (2)  savings banks;

109-26               (3)  trust companies;

109-27               (4)  savings and loan associations;

109-28               (5)  insurance companies;

109-29               (6)  fiduciaries;

 110-1               (7)  trustees;

 110-2               (8)  guardians; and

 110-3               (9)  sinking funds and other public funds of the state

 110-4   and its agencies and of political subdivisions of the state.

 110-5         Sec. 17.966.  MUTILATED, LOST, OR DESTROYED BONDS.  The board

 110-6   may provide for the replacement of mutilated, lost, or destroyed

 110-7   water financial assistance bonds.

 110-8         Sec. 17.967.  REFUNDING BONDS.  (a)  The board by resolution

 110-9   may provide for the issuance of water financial assistance bonds to

110-10   refund outstanding bonds and water financial assistance bonds

110-11   issued under this chapter and federal contractual obligations

110-12   incurred under Section 49-d, Article III, Texas Constitution.

110-13         (b)  The board may sell the refunding water financial

110-14   assistance bonds and use the proceeds to retire any of the

110-15   outstanding obligations described in Subsection (a), exchange the

110-16   refunding water financial assistance bonds for the outstanding

110-17   bonds or water financial assistance bonds, or refund any of the

110-18   outstanding obligations described in Subsection (a) in the manner

110-19   provided by any other applicable statute, including Chapter 503,

110-20   Acts of the 54th Legislature, 1955 (Article 717k, Vernon's Texas

110-21   Civil Statutes), and Chapter 784, Acts of the 61st Legislature,

110-22   Regular Session, 1969 (Article 717k-3, Vernon's Texas Civil

110-23   Statutes).

110-24         Sec. 17.968.  SALE OF POLITICAL SUBDIVISION BONDS BY THE

110-25   BOARD; USE OF PROCEEDS.  (a)  The board may sell or dispose of

110-26   political subdivision bonds purchased with money in the fund to any

110-27   person, including, without limitation, the Texas Water Resources

110-28   Finance Authority, and the board, in such manner as it shall

110-29   determine, may apply the proceeds of the sale of political

 111-1   subdivision bonds held by the board to:

 111-2               (1)  pay debt service on water financial assistance

 111-3   bonds issued under this subchapter; or

 111-4               (2)  provide financial assistance to political

 111-5   subdivisions for any one or more of the purposes authorized by

 111-6   Section 49-d-8, Article III, Texas Constitution.

 111-7         (b)  The board shall sell the political subdivision bonds at

 111-8   the price and under the terms that it determines to be reasonable.

 111-9         Sec.  17.969.  TAX EXEMPT BONDS.  Since the board is

111-10   performing an essential governmental function in the exercise of

111-11   the powers conferred on it by this chapter, water financial

111-12   assistance bonds issued under this subchapter and the interest and

111-13   income from the water financial assistance bonds, including any

111-14   profit made on the sale of water financial assistance bonds, and

111-15   all fees, charges, gifts, grants, revenues, receipts, and other

111-16   money received or pledged to pay or secure the payment of water

111-17   financial assistance bonds are free from taxation and assessments

111-18   of every kind by this state and any city, county, district,

111-19   authority, or other political subdivision of this state.

111-20         Sec. 17.970.  ENFORCEMENT BY MANDAMUS.  Payment of water

111-21   financial assistance bonds and obligations incurred under bond

111-22   enhancement agreements and performance of official duties

111-23   prescribed by Section 49-d-8, Article III, Texas Constitution, and

111-24   this subchapter may be enforced in a court of competent

111-25   jurisdiction by mandamus or other appropriate proceedings.

111-26         Sec. 17.971.  SUBCHAPTER CUMULATIVE OF OTHER LAWS.  (a)  This

111-27   subchapter is cumulative of other laws on the subject, and the

111-28   board may use provisions of other applicable laws in the issuance

111-29   of water financial assistance bonds and the execution of bond

 112-1   enhancement agreements, but this subchapter is wholly sufficient

 112-2   authority for the issuance of water financial assistance bonds, the

 112-3   execution of bond enhancement agreements, and the performance of

 112-4   all other acts and procedures authorized by this subchapter.

 112-5         (b)  In addition to other authority granted by this

 112-6   subchapter, the board may exercise the authority granted to the

 112-7   governing body of an issuer with regard to the issuance of

 112-8   obligations under Chapter 656, Acts of the 68th Legislature,

 112-9   Regular Session, 1983 (Article 717q, Vernon's Texas Civil

112-10   Statutes).

112-11         (c)  In exercising the powers granted to the board under this

112-12   subchapter, the board may exercise any powers granted to it under

112-13   this chapter and Chapter 16 including, without limitation, the

112-14   powers described in Subchapters D, E, F, G, and K, notwithstanding

112-15   any provision in this chapter or Chapter 16 that may be

112-16   inconsistent with or in conflict with the provisions of this

112-17   subchapter as a result of the establishment of the fund as a fund

112-18   separate and distinct from the existing Texas Water Development

112-19   Fund, it being the intent of the legislature that the financial

112-20   assistance made available to political subdivisions under this

112-21   subchapter, in pursuance of the authority granted by Section

112-22   49-d-8, Article III, Texas Constitution, be provided by the board

112-23   in the manner the board deems necessary and convenient to achieve

112-24   the purposes of Section 49-d-8, Article III, Texas Constitution,

112-25   and notwithstanding any other existing provisions in this chapter

112-26   or Chapter 16, the provisions of this chapter and Chapter 16 shall

112-27   be inclusive of the provisions of this subchapter and Section

112-28   49-d-8, Article III, Texas Constitution.

112-29         SECTION 4.04.  Subdivision (7), Section 17.001, Water Code,

 113-1   is amended to read as follows:

 113-2               (7)  "Water supply project" means:

 113-3                     (A)  any engineering undertaking or work to

 113-4   conserve and develop surface or subsurface water resources of the

 113-5   state, including the control, storage, and preservation of its

 113-6   storm water and floodwater and the water of its rivers and streams

 113-7   for all useful and lawful purposes by the acquisition, improvement,

 113-8   extension, or construction of dams, reservoirs, and other water

 113-9   storage projects, which may include flood storage, including

113-10   underground storage projects, filtration and water treatment

113-11   plants, including any system necessary to transport water from

113-12   storage to points of distribution or from storage to filtration and

113-13   treatment plants, including facilities for transporting water

113-14   therefrom to wholesale purchasers or to retail purchasers as

113-15   authorized by Section 17.072(c) of this code, by the acquisition,

113-16   by purchase of rights in [underground] water, by the drilling of

113-17   wells, or for any one or more of these purposes or methods; [or]

113-18                     (B)  any engineering undertaking or work outside

113-19   the state to provide for the maintenance and enhancement of the

113-20   quality of water by eliminating saline inflow through well pumping

113-21   and deep well injection of brine; or

113-22                     (C)  any undertaking or work by Texas political

113-23   subdivisions to conserve, convey, or develop surface or subsurface

113-24   water resources in areas outside Texas if such undertaking or work

113-25   results in water being available for use in or for the benefit of

113-26   Texas.

113-27         SECTION 4.05.  Section 17.001, Water Code, is amended by

113-28   amending Subdivision (17) and adding Subdivision (25) to read as

113-29   follows:

 114-1               (17)  "Financial assistance" means any loan of funds

 114-2   from the water supply account, the water quality enhancement

 114-3   account, or the flood control account to a political subdivision

 114-4   for construction of a water supply project, treatment works, or

 114-5   flood control measures through the purchase of bonds or other

 114-6   obligations of the political subdivision, and any loan of funds the

 114-7   source of which is the proceeds from water financial assistance

 114-8   bonds.

 114-9               (25)  "Water financial assistance bonds" means the

114-10   Texas Water Development Bonds authorized to be issued by Section

114-11   49-d-8, Article III, Texas Constitution, and dedicated to use for

114-12   the purposes described in that section.

114-13         SECTION 4.06.  Section 17.011, Water Code, is amended by

114-14   adding Subsection (c) to read as follows:

114-15         (c)  Notwithstanding any other provision of this section, the

114-16   board by resolution may issue water financial assistance bonds for

114-17   any one or more of the purposes described in Section 49-d-8,

114-18   Article III, Texas Constitution, in an aggregate principal amount

114-19   not to exceed the amount of bonds authorized by Section 49-d-8,

114-20   Article III, Texas Constitution, in accordance with the provisions

114-21   of Subchapter L.

114-22         SECTION 4.07.  Section 17.0111, Water Code, is amended to

114-23   read as follows:

114-24         Sec. 17.0111.  DEDICATION OF CERTAIN BONDS.  No more than

114-25   $250,000,000 in principal [Fifty percent of the] amount of bonds

114-26   authorized by Article III, Section 49-d-7, of the Texas

114-27   Constitution, and issued under either that section or Article III,

114-28   Section 49-d-8, of the Texas Constitution, may be [is] dedicated to

114-29   the purposes provided by Subchapter K [of this chapter].

 115-1         SECTION 4.08.  Section 17.182, Water Code, is amended to read

 115-2   as follows:

 115-3         Sec. 17.182.  PROCEEDS FROM SALE.  Unless used to pay debt

 115-4   service on bonds issued under this chapter, the proceeds from the

 115-5   sale of political subdivision bonds held by the board either shall

 115-6   be credited to the account from which financial assistance was made

 115-7   to the political subdivision, except that accrued interest shall be

 115-8   credited to the interest and sinking fund, or shall be deposited to

 115-9   the credit of the Texas Water Development Fund II, established

115-10   within the state treasury pursuant to Section 49-d-8, Article III,

115-11   Texas Constitution.  However, no such proceeds shall be deposited

115-12   to the credit of the Texas Water Development Fund II unless the

115-13   executive administrator certifies to the board that the transfer of

115-14   such proceeds into the Texas Water Development Fund II will not

115-15   cause the board, in the fiscal year the transfer is made, to direct

115-16   the comptroller to transfer out of the first money coming into the

115-17   state treasury during that fiscal year funds sufficient for the

115-18   payment of principal of or interest on water development bonds,

115-19   other than water development bonds issued for the purposes

115-20   described in Subsection (e), Section 49-d-7, Article III, Texas

115-21   Constitution, coming due in that fiscal year.

115-22         SECTION 4.09.  Section 17.278, Water Code, is amended to read

115-23   as follows:

115-24         Sec. 17.278.  FINDINGS REGARDING PERMITS.  If an application

115-25   includes a proposal for a wastewater treatment plant, the board may

115-26   not deliver funds for the wastewater treatment plant until the

115-27   applicant has obtained a permit for the construction and operation

115-28   of the plant and approval of the plans and specifications for the

115-29   plant from the commission.  If an application includes a proposal

 116-1   for a wastewater treatment plant that is located outside the

 116-2   jurisdiction of this state and that is not subject to the

 116-3   permitting authority of the commission, the board may not deliver

 116-4   funds for the wastewater treatment plant until after the board

 116-5   reviews the plans and specifications in coordination with the

 116-6   commission and finds that the wastewater treatment plant is capable

 116-7   of producing effluent that will meet federal and Texas-approved

 116-8   water quality standards.

 116-9                ARTICLE 5.  SMALL COMMUNITIES ASSISTANCE

116-10         SECTION 5.01.  Section 5.311, Water Code, is amended to read

116-11   as follows:

116-12         Sec. 5.311.  DELEGATION OF RESPONSIBILITY.  (a)  The

116-13   commission may delegate to an administrative law judge of the State

116-14   Office of Administrative Hearings the responsibility to hear any

116-15   matter before the commission and the authority to issue orders

116-16   related to interim rates under Chapter 13.

116-17         (b)  Except for a hearing related to interim rates as

116-18   provided in Subsection (a), the [The] administrative law judge

116-19   shall report to the commission on a [the] hearing in the manner

116-20   provided by law.

116-21         SECTION 5.02.  Subdivisions (11), (21), and (24), Section

116-22   13.002, Water Code, are amended to read as follows:

116-23               (11)  "Member" means a person who holds a membership in

116-24   a water supply or sewer service corporation and [who either

116-25   receives water or sewer utility service from the corporation or] is

116-26   a record owner of a fee simple title to property in an area served

116-27   by a water supply or sewer service corporation or a person who is

116-28   granted a membership and who either currently receives or will be

116-29   eligible to receive water or sewer utility service from the

 117-1   corporation.  In determining member control of a water supply or

 117-2   sewer service corporation, a person is entitled to only one vote

 117-3   regardless of the number of memberships the person owns.

 117-4               (21)  "Service" means any act [done, rendered, or]

 117-5   performed, anything furnished or supplied, and any facilities or

 117-6   lines dedicated or [facility] used[, furnished, or supplied] by a

 117-7   retail public utility in the performance of its duties under this

 117-8   chapter to its patrons, its employees, other retail public

 117-9   utilities, and the public, as well as the interchange of facilities

117-10   between two or more retail public utilities.

117-11               (24)  "Water supply or sewer service corporation" means

117-12   a nonprofit[, member-owned, member-controlled] corporation

117-13   organized and operating under Chapter 76, Acts of the 43rd

117-14   Legislature, 1st Called Session, 1933 (Article 1434a, Vernon's

117-15   Texas Civil Statutes) that provides potable water service or sewer

117-16   service for compensation and that has  adopted and is operating in

117-17   accordance with bylaws or articles of incorporation which ensure

117-18   that it is member-owned and member-controlled.  The term does not

117-19   include a corporation that provides retail water or sewer service

117-20   to a person who is not a member, except that the corporation may

117-21   provide retail water or sewer service to a person who is not a

117-22   member if the person only builds on or develops property to sell to

117-23   another and the service is provided on an interim basis before the

117-24   property is sold.

117-25         SECTION 5.03.  Section 13.181, Water Code, is amended to read

117-26   as follows:

117-27         Sec. 13.181.  POWER TO ENSURE COMPLIANCE; RATE REGULATION.

117-28   (a)  Except for the provisions of Section 13.192, this subchapter

117-29   shall apply only to a utility and shall not be applied to

 118-1   municipalities, counties, districts, or water supply or sewer

 118-2   service corporations.

 118-3         (b)  Subject to this chapter, the commission has all

 118-4   authority and power of the state to ensure compliance with the

 118-5   obligations of utilities under this chapter.  For this purpose the

 118-6   regulatory authority may fix and regulate rates of utilities,

 118-7   including rules and regulations for  determining the classification

 118-8   of customers and services and for determining the applicability of

 118-9   rates.  A rule or order of the regulatory authority may not

118-10   conflict with the rulings of any federal  regulatory body.  [Except

118-11   Section 13.192, this subchapter shall apply only to a utility and

118-12   shall not be applied to municipalities, counties, districts, or

118-13   water supply or sewer service corporations.]  The commission may

118-14   adopt rules which authorize a utility which is permitted under

118-15   Section 13.242(c) to provide service without a certificate of

118-16   public convenience and necessity to request or implement a rate

118-17   increase and operate according to rules, regulations, and standards

118-18   of service other than those otherwise required under this chapter

118-19   provided that rates are just and reasonable for customers and the

118-20   utility and that service is safe, adequate, efficient, and

118-21   reasonable.

118-22         SECTION 5.04.  Section 13.183, Water Code, is amended by

118-23   adding Subsection (c) to read as follows:

118-24         (c)  To ensure that retail customers receive a higher quality

118-25   or more reliable water or sewer service, to encourage

118-26   regionalization, or to maintain financially stable and technically

118-27   sound utilities, the regulatory authority may develop methodologies

118-28   for water or wastewater rates based on factors other than rate of

118-29   return and those specified in Section 13.185.  Overall revenues

 119-1   determined pursuant to a methodology developed under this section

 119-2   must provide revenues to the utility that satisfy the requirements

 119-3   of Subsection (a) but must also be reasonable for the customers in

 119-4   consideration of the enhanced quality or reliability of the

 119-5   services provided.

 119-6         SECTION 5.05.  Subsection (a), Section 13.184, Water Code, is

 119-7   amended to read as follows:

 119-8         (a)  Unless the regulatory authority adopts rules to further

 119-9   the purposes stated in Section 13.183(c), the [The] regulatory

119-10   authority may not prescribe any rate that will yield more than a

119-11   fair return on the invested capital used and useful in rendering

119-12   service to the public.

119-13         SECTION 5.06.  Subsection (a), Section 13.185, Water Code, is

119-14   amended to read as follows:

119-15         (a)  Except as provided in Sections 13.183(c) and 13.184(a),

119-16   the [The] components of invested capital and net income shall be

119-17   determined according to the rules stated in this section.

119-18         SECTION 5.07.  Subchapter G, Chapter 13, Water Code, is

119-19   amended by adding Section 13.241 to read as follows:

119-20         Sec. 13.241.  GRANTING OR AMENDING CERTIFICATES.  In

119-21   determining whether to grant or amend a certificate of public

119-22   convenience and necessity, the commission shall ensure that the

119-23   groundwater and surface water resources in Texas are adequately

119-24   protected and efficiently used and shall consider regionalization

119-25   or consolidation of systems whenever it is economically feasible or

119-26   otherwise in the public interest.  A retail public utility

119-27   requesting a certificate of public convenience and necessity to

119-28   provide water or sewer service must satisfy the commission that a

119-29   safe, continuous, and adequate supply of drinking water meeting the

 120-1   requirements of Chapter 341, Health and Safety Code, or this code

 120-2   or continuous and adequate sewer service meeting permit, water

 120-3   quality, and other requirements of this code will be provided to

 120-4   the public and that the retail public utility will maintain the

 120-5   necessary financial resources and managerial expertise to provide

 120-6   continuous and adequate service to the public.

 120-7         SECTION 5.08.  Section 13.246, Water Code, is amended by

 120-8   amending Subsection (c) and adding Subsections (d) and (e) to read

 120-9   as follows:

120-10         (c)  Certificates of convenience and necessity shall be

120-11   granted or amended on a nondiscriminatory basis  after

120-12   consideration by the commission of the adequacy of service

120-13   currently provided to the requested area, the need for additional

120-14   service in the requested area, the effect of the granting of a

120-15   certificate on the recipient of the certificate and on any retail

120-16   public utility of the same kind already serving the proximate area,

120-17   the ability of the applicant to provide adequate service, the

120-18   efforts of the applicant to extend service to any economically

120-19   distressed areas located within the service areas certificated to

120-20   the applicant, the feasibility of obtaining service from an

120-21   adjacent retail public utility, the financial stability of the

120-22   applicant, including, if applicable, the adequacy of the

120-23   applicant's debt-equity ratio, environmental integrity, and the

120-24   probable improvement of service or lowering of cost to consumers in

120-25   that area resulting from the granting of the certificate.  In this

120-26   subsection, "economically distressed areas" are those areas as

120-27   defined in Chapter 15.

120-28         (d)  The commission may require that an applicant submit a

120-29   business plan demonstrating adequate financial, managerial, and

 121-1   technical capability for providing continuous and adequate service

 121-2   to the requested area and any areas currently certificated to the

 121-3   applicant.  The commission may include conditions in the

 121-4   certificate of public convenience and necessity to ensure that the

 121-5   certificate holder complies with the business plan.

 121-6         (e)  The commission may require an applicant to provide

 121-7   financial assurance in a form acceptable to the commission to

 121-8   ensure that continuous and adequate service is provided.

 121-9         SECTION 5.09.  Section 13.253, Water Code, is amended to read

121-10   as follows:

121-11         Sec. 13.253.  IMPROVEMENTS IN SERVICE; INTERCONNECTING

121-12   SERVICE.  After notice and hearing, the commission may:

121-13               (1)  order any retail public utility that possesses or

121-14   is required by law to possess a certificate of public convenience

121-15   and necessity to provide specified improvements in its service in a

121-16   defined area if service in that area is inadequate or is

121-17   substantially inferior to service in a comparable area and it is

121-18   reasonable to require the retail public utility to provide the

121-19   improved service;

121-20               (2)  order two or more retail public utilities that

121-21   hold or are required by this code to hold a certificate of public

121-22   convenience and necessity [or water supply or sewer service

121-23   corporations] to establish specified facilities for the

121-24   interconnecting service; or

121-25               (3)  issue an emergency order, with or without a

121-26   hearing, under Section 13.041 of this code.

121-27         SECTION 5.10.  Section 13.254, Water Code, is amended to read

121-28   as follows:

121-29         Sec. 13.254.  REVOCATION OR AMENDMENT OF CERTIFICATE.

 122-1   (a)  The commission at any time after notice and hearing may revoke

 122-2   or amend any certificate of public convenience and necessity with

 122-3   the written consent of the certificate holder or if it finds that:

 122-4               (1)  the certificate holder  has never provided, is no

 122-5   longer providing, or has failed to provide continuous and adequate

 122-6   service in the area, or part of the area, covered by the

 122-7   certificate including economically distressed areas as defined in

 122-8   Chapter 15;

 122-9               (2)  the cost of providing service makes the service

122-10   offered by the certificate holder so prohibitively expensive as to

122-11   constitute denial of service, or for commercial developments or

122-12   residential developments with lot sizes of less than two acres, the

122-13   cost of obtaining service from the currently certificated retail

122-14   public utility makes the development economically infeasible but

122-15   not necessarily prohibitively expensive;

122-16               (3)  the certificate holder has agreed to allow another

122-17   retail public utility to provide service within its service area

122-18   without amending its certificate; or

122-19               (4)  the certificate holder has failed to file a cease

122-20   and desist action pursuant to Section 13.252 within 90 days of the

122-21   date that it became aware that another retail public utility was

122-22   providing service within the certificate holder's service area,

122-23   unless the certificate holder is able to demonstrate good cause for

122-24   its failure to file such action within the 90-day period.

122-25         (b)  Upon written request from the certificate holder, the

122-26   executive director may cancel the certificate of a utility or water

122-27   supply corporation authorized by rule to operate without a

122-28   certificate of public convenience and necessity under Section

122-29   13.242(c).

 123-1         (c)  If the certificate of any retail public utility is

 123-2   revoked or amended, the commission may require one or more retail

 123-3   public utilities,  with their consent, or one or more public

 123-4   utilities to provide service in the area in question.

 123-5         (d)  A retail public utility may not in any way render retail

 123-6   water or sewer service directly or indirectly to the public in an

 123-7   area which has been decertified under this section without the

 123-8   consent of the retail public utility which previously held the

 123-9   certificate of public convenience and necessity unless it has first

123-10   obtained from the commission a certificate of public convenience

123-11   and necessity.  If the commission decertifies a retail public

123-12   utility without its consent under this section, the commission

123-13   shall determine the extent to which any utility facilities

123-14   currently used and useful for providing service or utility

123-15   facilities constructed for the purpose of serving the area being

123-16   decertified will be rendered useless as a result of this commission

123-17   action.  The commission shall also determine the impact on the

123-18   retail public utility's ability to repay any debts owed for

123-19   facilities or services dedicated to serve the area being

123-20   decertified.  As a condition of granting a certificate of public

123-21   convenience and necessity to another retail public utility to serve

123-22   the area, the commission shall require the new utility service

123-23   provider to compensate the decertified retail public utility.  In

123-24   determining the amount of compensation, the commission shall

123-25   consider:

123-26               (1)  any revenues which would have been generated by

123-27   existing or potential customers in the area decertified to the

123-28   extent that those revenues would have been used to repay debts owed

123-29   to the state or federal government for facilities constructed for

 124-1   the purpose of providing service to the area decertified;

 124-2               (2)  any revenues which would have been generated by

 124-3   existing or potential customers in the area decertified to the

 124-4   extent that those revenues would have been used to repay debts to

 124-5   persons other than affiliated interests for the construction of

 124-6   facilities to provide service to the area decertified; and

 124-7               (3)  the retail public utility's actual unrecovered

 124-8   investment in any facilities no longer useful or expected to be

 124-9   needed by the retail public utility for serving its remaining

124-10   service area within a future time period that would allow recovery

124-11   of the retail public utility's actual unrecovered investment,

124-12   unless the commission's action is for a reason other than the

124-13   certificated retail public utility's failure to extend service to

124-14   qualified applicants in the area within a reasonable time period or

124-15   because service to qualified service applicants is deemed

124-16   prohibitively expensive.

124-17         (e)  The commission may require payment of the compensation

124-18   to a decertified retail public utility in a lump sum or may allow

124-19   payment to be made by the newly certificated retail public utility

124-20   on a per-customer basis as new customers are added in the

124-21   decertified area, after considering the financial impact on the

124-22   decertified retail public utility.

124-23         SECTION 5.11.  Subsection (a), Section 13.301, Water Code, is

124-24   amended to read as follows:

124-25         (a)  A utility or a water supply or sewer service corporation

124-26   shall notify the commission by filing a written application and

124-27   shall give public notice unless public notice is waived by the

124-28   executive director for good cause shown at least 120 days before

124-29   the effective date  of any sale, acquisition, lease, or rental of

 125-1   any water or sewer system required by law to possess a certificate

 125-2   of public convenience and necessity or of any merger or

 125-3   consolidation with such a utility or water supply or sewer service

 125-4   corporation.  The application shall include a business plan

 125-5   demonstrating adequate financial, managerial, and technical

 125-6   capability of the person purchasing or acquiring the water or sewer

 125-7   system for providing continuous and adequate service to the

 125-8   requested area and any areas currently certificated to the person

 125-9   purchasing or acquiring the water or sewer system.

125-10         SECTION 5.12.  Subsection (a), Section 13.302, Water Code, is

125-11   amended to read as follows:

125-12         (a)  A utility may not purchase voting stock in another

125-13   utility doing business in this state and a person may not acquire a

125-14   controlling interest in a utility doing business in this state

125-15   unless the person or utility notifies the commission by filing a

125-16   written application of the proposed purchase or acquisition not

125-17   later than the 61st day before the date on which the transaction is

125-18   to occur.  If a person is acquiring a controlling interest, the

125-19   application must also include a business plan demonstrating

125-20   adequate financial, managerial, and technical capability of the

125-21   person acquiring controlling interest in the utility for providing

125-22   continuous and adequate service.

125-23         SECTION 5.13.  Section 13.412, Water Code, is amended by

125-24   adding Subsections (f) and (g) to read as follows:

125-25         (f)  Notwithstanding Section 64.021, Civil Practice and

125-26   Remedies Code, a receiver appointed under this section may seek

125-27   commission approval to acquire the water or sewer utility

125-28   facilities and transfer the certificate of public convenience and

125-29   necessity of the system in receivership.  Application shall be in

 126-1   accordance with Subchapter H.

 126-2         (g)  For purposes of this section and Section 13.4132 of this

 126-3   code, abandonment may include but is not limited to:

 126-4               (1)  failure to pay bills or other obligations to

 126-5   electric or gas utilities or other retail public utilities

 126-6   resulting in notices of discontinuance of necessary services;

 126-7               (2)  failure to provide appropriate water or wastewater

 126-8   treatment resulting in potential health hazards;

 126-9               (3)  failure to adequately maintain facilities

126-10   resulting in potential health hazards, extended outages, or

126-11   repeated service interruptions;

126-12               (4)  failure to provide adequate notice to customers of

126-13   existing or potential health hazards;

126-14               (5)  failure to secure an alternative water supply when

126-15   available during outages;

126-16               (6)  displaying a pattern of hostility or repeated

126-17   failure to respond to customers or the commission;

126-18               (7)  notification by the utility owner to the

126-19   commission that the owner is abandoning the system; or

126-20               (8)  inability of the commission to contact the utility

126-21   because the utility has failed to keep the commission informed on

126-22   how to contact the utility for normal business purposes or

126-23   emergencies.

126-24         SECTION 5.14.  Subsections (a) and (c), Section 13.4132,

126-25   Water Code, are amended to read as follows:

126-26         (a)  The commission, after providing to the utility notice

126-27   and an opportunity to be heard at a commission meeting as an item

126-28   on its agenda [for a hearing], may authorize a willing person to

126-29   temporarily manage and operate a utility that has discontinued or

 127-1   abandoned operations or the provision of services or is being or

 127-2   has been referred to the attorney general for the appointment of a

 127-3   receiver under Section 13.412 of this code.

 127-4         (c)  A person appointed under this section has the powers and

 127-5   duties necessary to ensure the continued operation of the utility

 127-6   and the provision of continuous and adequate services to customers,

 127-7   including the power and duty to:

 127-8               (1)  read meters;

 127-9               (2)  bill for utility services;

127-10               (3)  collect revenues;

127-11               (4)  disburse funds; [and]

127-12               (5)  access all system components; and

127-13               (6)  request rate increases.

127-14         SECTION 5.15.  Section 15.602, Water Code, is amended to read

127-15   as follows:

127-16         Sec. 15.602.  DEFINITIONS.  In this subchapter:

127-17               (1)  "Additional state revolving fund" means any state

127-18   revolving fund hereafter established by the board to provide

127-19   financial assistance to political subdivisions for public works in

127-20   accordance with a capitalization grant program hereafter

127-21   established by a federal agency or otherwise authorized by federal

127-22   law.

127-23               (2)  "Authorized investments" means any authorized

127-24   investments described in Section 404.024, Government Code.

127-25               (3)  "Community water system" means a public water

127-26   system that:

127-27                     (A)  serves at least 15 service connections used

127-28   by year-round residents of the area served by the system; or

127-29                     (B)  regularly serves at least 25 year-round

 128-1   residents.

 128-2               (4)  "Construction" shall have the meaning assigned by

 128-3   the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.).

 128-4               (5)  "Disadvantaged community" means an area meeting

 128-5   criteria established by board rule, which criteria shall be based

 128-6   on measures that may include single-family residential property

 128-7   valuation, income levels of residents of the area, or other

 128-8   similarly appropriate measures.

 128-9               (6) [(4)]  "Federal Act" means the Federal Water

128-10   Pollution Control Act, as amended (33 U.S.C. 1251 et seq.).

128-11               (7)  "Nonprofit noncommunity water system" means a

128-12   public water system that is not operated for profit and that:

128-13                     (A)  is owned by a political subdivision or

128-14   nonprofit entity; and

128-15                     (B)  is not a community water system.

128-16               (8) [(5)]  "Political subdivision" means a

128-17   municipality, intermunicipal, interstate, or state agency, [or] any

128-18   other public entity eligible for assistance under this subchapter,

128-19   or a nonprofit water supply corporation created and operating under

128-20   Chapter 76, Acts of the 43rd Legislature, 1st Called Session, 1933

128-21   (Article 1434a, Vernon's Texas Civil Statutes), if such entity is

128-22   eligible for financial assistance under federal law establishing

128-23   the state revolving fund or an additional state revolving fund.

128-24               (9)  "Public water system" means a system that is owned

128-25   by any person and that meets the definition of public water system

128-26   in the Safe Drinking Water Act.

128-27               (10) [(6)]  "Public works" means any project to

128-28   acquire, construct, improve, repair, or otherwise provide any

128-29   buildings, structures, facilities, equipment, or other real or

 129-1   personal property or improvements designed for public use,

 129-2   protection, or enjoyment undertaken by a political subdivision and

 129-3   paid for, in whole or in part, out of public funds.

 129-4               (11) [(7)]  "Revolving fund" means the state water

 129-5   pollution control revolving fund.

 129-6               (12)  "Safe Drinking Water Act" means Title XIV of the

 129-7   federal Public Health Service Act, commonly known as the Safe

 129-8   Drinking Water Act, as amended (42 U.S.C. Section 300f et seq.).

 129-9               (13)  "Safe drinking water revolving fund" means the

129-10   fund established by the board as an additional state revolving fund

129-11   to provide  financial assistance in accordance with the federal

129-12   program established pursuant to the provisions of the Safe Drinking

129-13   Water Act.

129-14               (14) [(8)]  "Treatment works" has the meaning

129-15   established by the federal act and the eligible components of the

129-16   management programs established by Sections 319 and 320 of the

129-17   federal act.

129-18         SECTION 5.16.  Subchapter J, Chapter 15, Water Code, is

129-19   amended by adding Section 15.6041 to read as follows:

129-20         Sec. 15.6041.  FINANCIAL ASSISTANCE UNDER THE SAFE DRINKING

129-21   WATER REVOLVING FUND.  (a)  The safe drinking water revolving fund

129-22   shall be administered by the board under this subchapter and rules

129-23   adopted by the board.  The safe drinking water revolving fund shall

129-24   be held and administered by the board in the same manner as

129-25   provided by Section 15.603, except that the safe drinking water

129-26   revolving fund shall be held and administered in accordance with

129-27   the Safe Drinking Water Act and shall be used to provide financial

129-28   assistance in accordance with that act and in the manner provided

129-29   by rules adopted by the board:

 130-1               (1)  to political subdivisions for community water

 130-2   systems;

 130-3               (2)  to persons other than political subdivisions for

 130-4   community water systems or nonprofit noncommunity water systems

 130-5   from the account established by Subsection (b)(1);

 130-6               (3)  to persons, including political subdivisions, for

 130-7   service to disadvantaged communities from the account established

 130-8   by Subsection (b)(2); and

 130-9               (4)  for other purposes authorized by the Safe Drinking

130-10   Water Act.

130-11         (b)  In addition to other accounts the board may establish in

130-12   the safe drinking water revolving fund, the board shall establish

130-13   the following separate accounts:

130-14               (1)  the community/noncommmunity water system financial

130-15   assistance account, to be used solely for providing financial

130-16   assistance to persons, other than political subdivisions, providing

130-17   services through a community water system or a nonprofit

130-18   noncommunity water system, which account shall be composed solely

130-19   of funds appropriated by the legislature, funds provided as gifts

130-20   or grants by the United States government, interest earnings on

130-21   amounts credited to the account, and repayments of loans made from

130-22   the account; and

130-23               (2)  the disadvantaged community account, to be used

130-24   solely for providing financial assistance under the terms of

130-25   Subsections (c) and (d), which account shall be composed solely of

130-26   funds appropriated by the legislature, funds provided as gifts or

130-27   grants by the United States government, interest earnings on

130-28   amounts credited to the account, and repayments of loans made from

130-29   the account.

 131-1         (c)  The board may provide financial assistance from the

 131-2   disadvantaged community account to:

 131-3               (1)  a political subdivision:

 131-4                     (A)  that is a disadvantaged community; or

 131-5                     (B)  for a project serving an area that:

 131-6                           (i)  is located outside the boundaries of

 131-7   the political subdivision; and

 131-8                           (ii)  meets the definition of a

 131-9   disadvantaged community; or

131-10               (2)  an owner of a community water system that is

131-11   ordered by the commission to provide service to a disadvantaged

131-12   community, provided that the financial assistance is for the sole

131-13   purpose of providing service to a disadvantaged community.

131-14         (d)  In providing financial assistance from the disadvantaged

131-15   community account, the board shall determine the amount of a loan

131-16   which the political subdivision cannot repay based on affordability

131-17   criteria established by the board by rule.  The board shall forgive

131-18   repayment of that portion of the principal of the loan which the

131-19   board determines the political subdivision cannot repay.  Financial

131-20   assistance from the disadvantaged community account may not exceed

131-21   the allowable percentage of the amount of the capitalization grant

131-22   received by the state pursuant to the Safe Drinking Water Act.

131-23         SECTION 5.17.  Subsections (c) and (g), Section 15.603, Water

131-24   Code, are amended to read as follows:

131-25         (c)  The revolving fund consists of money derived from

131-26   federal grants, direct appropriations, investment earnings on

131-27   amounts credited to the revolving fund, and, at the board's

131-28   discretion, from any and all sources available [to provide the

131-29   required state match for the purposes of this subchapter].

 132-1         (g)  The revolving fund and any accounts established in the

 132-2   revolving fund shall be kept and maintained by or at the direction

 132-3   of the board and do not constitute and are not a part of the State

 132-4   Treasury.  However, at the direction of the board, the revolving

 132-5   fund or accounts in the revolving fund may be kept and held in

 132-6   escrow and in trust by the comptroller [State Treasurer] for and on

 132-7   behalf of the board, shall be used only as provided by this

 132-8   subchapter, and pending such use shall be invested in authorized

 132-9   investments as provided by any order, resolution, or rule of the

132-10   board.  Legal title to money and investments in the revolving fund

132-11   is in the board unless or until paid out as provided by this

132-12   subchapter, the federal act, and the rules of the board.  The

132-13   comptroller [State Treasurer], as custodian, shall administer the

132-14   funds strictly and solely as provided by this subchapter and in the

132-15   orders, resolutions, and rules, and the state shall take no action

132-16   with respect to the revolving fund other than that specified in

132-17   this subchapter, the federal act, and the rules of the board.

132-18         SECTION 5.18.  Section 341.031, Health and Safety Code, is

132-19   amended to read as follows:

132-20         Sec. 341.031.  PUBLIC DRINKING WATER.  (a)  In order to

132-21   preserve the health, safety, and welfare of the citizens of the

132-22   state, the commission shall ensure that public drinking water

132-23   supply systems:

132-24               (1)  provide a continuous, adequate, and safe supply of

132-25   drinking water; and

132-26               (2)  are financially stable and technically sound.

132-27         (b)  The commission shall encourage and promote the

132-28   development and use of regional and area-wide drinking water supply

132-29   systems.

 133-1         (c)  Public drinking water must be free from deleterious

 133-2   matter and must comply with the standards established by the

 133-3   commission[, the United States Public Health Service,] or the

 133-4   United States Environmental Protection Agency.  The commission may

 133-5   adopt and enforce rules to implement the federal Safe Drinking

 133-6   Water Act (42 U.S.C. Section 300f et seq.).

 133-7         (d) [(b)]  In a public place or an establishment catering to

 133-8   the public, a common drinking cup may not be used.

 133-9         (e) [(c)]  Drinking water may not be served except in

133-10   sanitary containers or through other sanitary mediums.

133-11         (f) [(d)]  In this section, "common drinking cup" means a

133-12   water or other beverage receptacle used for serving more than one

133-13   person.  The term does not include a water or other beverage

133-14   receptacle that is properly washed and sterilized after each use.

133-15         SECTION 5.19.  Section 341.035, Health and Safety Code, is

133-16   amended to read as follows:

133-17         Sec. 341.035.  APPROVED PLANS REQUIRED FOR PUBLIC WATER

133-18   SUPPLIES.  (a)  Unless a person is a political subdivision or has

133-19   executed an agreement with a political subdivision to transfer the

133-20   ownership and operation of the water supply system to the political

133-21   subdivision, a [A] person [contemplating] establishing a drinking

133-22   water supply system for public use must submit a business plan to

133-23   the commission for review and approval prior to beginning

133-24   construction demonstrating adequate financial, managerial, and

133-25   technical capability of the system management and ownership.  The

133-26   commission may require an applicant to provide financial assurance

133-27   in a form acceptable to the commission to ensure a continuous and

133-28   safe supply of drinking water.

133-29         (b)  After the business plan is approved, if one is required,

 134-1   but in any case before construction begins, completed plans and

 134-2   specifications must be submitted to the commission for review and

 134-3   approval in accordance with standards established by the commission

 134-4   [before  construction of the system].  [The commission shall

 134-5   approve plans that conform to the state's water safety laws.]  The

 134-6   water supply system may be constructed [established] only after

 134-7   [on] the commission's approval is received.

 134-8         (c) [(b)]  Any agency, including a municipality, supplying a

 134-9   drinking water service to the public that intends to make a

134-10   material or major change in a water supply system that may affect

134-11   the sanitary features of that utility must give written notice of

134-12   that intention to the commission before making the change.

134-13         (d) [(c)]  A water supply system owner, manager, or operator

134-14   or an agent of a water supply system owner, manager, or operator

134-15   may not advertise or announce a water supply as being of a quality

134-16   other than the quality that is disclosed by the commission's latest

134-17   rating.

134-18         (e) [(d)]  The commission shall assemble and tabulate all

134-19   necessary data relating to public drinking water supplies at least

134-20   once each year and as often during the year as conditions demand or

134-21   justify.  The data forms the basis of an official comparative

134-22   rating of public drinking water supply systems.

134-23         (f) [(e)]  A water supply system that attains an approved

134-24   rating is entitled to erect signs of a design approved by the

134-25   commission on highways approaching the municipality in which the

134-26   water supply system is located.  The signs shall be immediately

134-27   removed on notice from the commission if the water supply system

134-28   does not continue to meet the specified standards.

134-29         SECTION 5.20.  Subchapter C, Chapter 341, Health and Safety

 135-1   Code, is amended by adding Section 341.0351 to read as follows:

 135-2         Sec. 341.0351.  CONTINUOUS AND SAFE DRINKING WATER SUPPLY

 135-3   REQUIREMENTS.  (a)  All drinking water supply systems for public

 135-4   use must provide a continuous and safe supply of drinking water

 135-5   which meets the requirements of Section 341.031(c).

 135-6         (b)  If a public drinking water supply system has a history

 135-7   of noncompliance or has been subject to enforcement action by the

 135-8   commission, the owner or manager of the system may be required to

 135-9   demonstrate that financial and technical resources are available to

135-10   ensure future operation of the system in compliance with all

135-11   applicable laws and rules.  The commission may require submission

135-12   of a business plan demonstrating the financial, managerial, and

135-13   technical capability of the system management and ownership.  The

135-14   commission may require the owner of the system to provide financial

135-15   assurance in a form acceptable to the commission to ensure a

135-16   continuous and safe supply of drinking water.

135-17         (c)  A public water supply system which has been constructed

135-18   without approval as required under Section 341.035 or which the

135-19   executive director of the commission determines presents an

135-20   imminent health hazard may be required to temporarily cease

135-21   operations on receipt by either mail or hand delivery of a letter

135-22   from the commission or the executive director ordering cessation of

135-23   operations.  Operations may not resume until authorized by the

135-24   commission or the executive director.  A public water system

135-25   ordered to cease operations under this subsection is entitled to an

135-26   expedited hearing before the commission on written request.

135-27         SECTION 5.21.  Subsections (a) and (b), Section 341.047,

135-28   Health and Safety Code, are amended to read as follows:

135-29         (a)  A person commits an offense if the person:

 136-1               (1)  violates a provision of Section 341.031;

 136-2               (2)  violates a provision of Section 341.032(a) or (b);

 136-3               (3)  violates a provision of Section 341.033(a)-(f);

 136-4               (4)  constructs a drinking water supply system without

 136-5   submitting completed plans and specifications as required by

 136-6   Section 341.035(b) [341.035(a)];

 136-7               (5)  establishes a drinking water supply system without

 136-8   the commission's approval as required by Section 341.035(a) or (b);

 136-9               (6)  violates a provision of Section 341.035(c)

136-10   [341.035(b)] or (d) [(c)];

136-11               (7)  fails to remove a sign as required by Section

136-12   341.035(f) [341.035(e)]; or

136-13               (8)  violates a provision of Section 341.036.

136-14         (b)  An offense under Subsection (a) is a Class C misdemeanor

136-15   [punishable by a fine of not less than $100].

136-16         SECTION 5.22.  Section 341.048, Health and Safety Code, is

136-17   amended to read as follows:

136-18         Sec. 341.048.  CIVIL ENFORCEMENT.  (a)  A person may not

136-19   cause, suffer, allow, or permit a violation of this subchapter or a

136-20   rule or order adopted under this subchapter.

136-21         (b)  A person who causes, suffers, allows, or permits a

136-22   violation under this subchapter  shall be assessed a civil penalty

136-23   of not less than $50 nor more than $10,000 [$500] for each

136-24   violation.  Each day of a continuing violation is a separate

136-25   violation.

136-26         (c)  [If it is shown on a trial of the defendant that the

136-27   defendant has previously been assessed a civil penalty under this

136-28   section within a year before the date on which the violation being

136-29   tried occurred, the defendant shall be assessed a civil penalty of

 137-1   not less than $50 nor more than $1,000 for each subsequent

 137-2   violation under this subchapter.  Each day of a continuing

 137-3   violation is a separate violation.]

 137-4         [(d)]  If it appears that a person has violated, is

 137-5   violating, or threatens to violate a provision under this

 137-6   subchapter, the commission, a county, or a municipality may

 137-7   institute a civil suit in a district court for:

 137-8               (1)  injunctive relief to restrain the person from

 137-9   continuing the violation or threat of violation;

137-10               (2)  the assessment and recovery of a civil penalty; or

137-11               (3)  both injunctive relief and a civil penalty.

137-12         (d) [(e)]  The commission is a necessary and indispensable

137-13   party in a suit brought by a county or municipality under this

137-14   section.

137-15         (e) [(f)]  On the commission's request, the attorney general

137-16   shall institute a suit in the name of the state for injunctive

137-17   relief, to recover a civil penalty, or for both injunctive relief

137-18   and civil penalty.

137-19         (f) [(g)]  The suit may be brought in Travis County, in the

137-20   county in which the defendant resides, or in the county in which

137-21   the violation or threat of violation occurs.

137-22         (g) [(h)]  In a suit under this section to enjoin a violation

137-23   or threat of violation of this subchapter, the court shall grant

137-24   the state, county, or municipality, without bond or other

137-25   undertaking, any injunction that the facts may warrant including

137-26   temporary restraining orders, temporary injunctions after notice

137-27   and hearing, and permanent injunctions.

137-28         (h) [(i)]  Civil penalties recovered in a suit brought under

137-29   this section by a county or municipality shall be equally divided

 138-1   between:

 138-2               (1)  the state; and

 138-3               (2)  the county or municipality that first brought the

 138-4   suit.

 138-5         SECTION 5.23.  Subsection (a), Section 341.049, Health and

 138-6   Safety Code, is amended to read as follows:

 138-7         (a)  If a person causes, suffers, allows, or permits a

 138-8   violation of this subchapter or a rule or order adopted under this

 138-9   subchapter, the commission may assess a penalty against that person

138-10   as provided by this section.  The penalty shall not be less than

138-11   $50 nor more than $10,000 [$500] for each violation.  Each day of a

138-12   continuing violation may be considered a separate violation.

138-13           ARTICLE 6.  WATER DATA COLLECTION AND DISSEMINATION

138-14         SECTION 6.01.  Section 16.012, Water Code, is amended to read

138-15   as follows:

138-16         Sec. 16.012.  STUDIES, INVESTIGATIONS, SURVEYS.  (a)  The

138-17   executive administrator shall make studies, investigations, and

138-18   surveys of the occurrence, quantity, quality, and availability of

138-19   the surface water and groundwater of this state and shall, in

138-20   cooperation with other entities of the state, guide the development

138-21   of a statewide water resource data collection and dissemination

138-22   network.  For these purposes the staff shall collect, receive,

138-23   analyze, [and] process, and facilitate access to basic data and

138-24   summary information concerning [the] water resources of the state

138-25   and provide guidance regarding data formats and descriptions

138-26   required to access and understand Texas water resource data.

138-27         (b)  The executive administrator shall:

138-28               (1)  determine suitable locations for future water

138-29   facilities, including reservoir sites;

 139-1               (2)  locate land best suited for irrigation;

 139-2               (3)  make estimates of the cost of proposed irrigation

 139-3   works and the improvement of reservoir sites;

 139-4               (4)  examine and survey reservoir sites; [and]

 139-5               (5)  investigate the effects of fresh water inflows

 139-6   upon the bays and estuaries of Texas;

 139-7               (6)  investigate instream flows including groundwater

 139-8   resources hydrologically connected to ecologically sensitive areas;

 139-9               (7)  lead a statewide effort, in coordination with

139-10   federal, state, and local governments and other interested parties,

139-11   to develop a network for collecting and disseminating water

139-12   resource-related information that is sufficient to support

139-13   assessment of ambient water conditions statewide;

139-14               (8)  make recommendations for optimizing the efficiency

139-15   and effectiveness of water resource data collection and

139-16   dissemination as necessary to ensure that basic water resource data

139-17   are maintained and available for Texas; and

139-18               (9)  make basic data and summary information developed

139-19   under this subsection accessible to state agencies and other

139-20   interested persons.

139-21         (c)  All entities of the state that collect or use water data

139-22   or information shall cooperate with the board in the development of

139-23   a coordinated, efficient, and effective statewide water resource

139-24   data collection and dissemination network.

139-25         (d)  The executive administrator shall keep full and proper

139-26   records of his work, observations, data, and calculations, all of

139-27   which are the property of the state.

139-28         (e) [(d)]  In performing his duties under this section, the

139-29   executive administrator shall assist the commission in carrying out

 140-1   the purposes and policies stated in Section 12.014 of this code.

 140-2         SECTION 6.02.  Section 16.021, Water Code, is amended to read

 140-3   as follows:

 140-4         Sec. 16.021.  TEXAS NATURAL RESOURCES INFORMATION SYSTEM.

 140-5   (a)  The executive administrator shall establish the Texas Natural

 140-6   Resources Information System (TNRIS) to serve Texas agencies and

 140-7   citizens as a centralized clearinghouse and referral center for

 140-8   natural resource, census, and other socioeconomic data [as a

 140-9   centralized information system incorporating all Texas natural

140-10   resource data, socioeconomic data related to natural resources, or

140-11   indexes related to that data that is collected by state agencies or

140-12   other entities].

140-13         (b)  The Texas Geographic Information Council (TGIC) [Natural

140-14   Resources Information System Task Force] is created to provide

140-15   strategic planning and coordination in the acquisition and use of

140-16   geo-spatial data and related technologies in the State of Texas.

140-17   The executive administrator and the executive director of the

140-18   Department of Information Resources shall designate entities to be

140-19   members of the TGIC.  The chief administrative officer of each

140-20   member entity shall select one representative to serve on the TGIC.

140-21   The duties of the TGIC shall include providing guidance to the

140-22   executive administrator in carrying out his duties under this

140-23   section and guidance to the Department of Information Resources for

140-24   development of rules related to statewide geo-spatial data and

140-25   technology standards.  [The task force is composed of one

140-26   representative from each state agency designated by the executive

140-27   administrator.  The executive administrator shall designate a state

140-28   agency as a participant in the task force if the agency collects or

140-29   uses natural resource and related socioeconomic data.

 141-1   Representatives of each designated agency shall be selected by the

 141-2   chief administrative officer of that agency.]

 141-3         (c)  Under the guidance of the TGIC [Texas Natural Resources

 141-4   Information System Task Force], the executive administrator shall:

 141-5               (1)  further develop [and implement] the Texas Natural

 141-6   Resources Information System by promoting and providing for

 141-7   effective acquisition, archiving, documentation, indexing, and

 141-8   dissemination of natural resource and related digital and

 141-9   nondigital data and information;

141-10               (2)  obtain information in response to disagreements

141-11   regarding names and name spellings for natural and cultural

141-12   features in the state and provide this information to the Board on

141-13   Geographic Names of the United States Department of the Interior;

141-14               (3)  make recommendations to the Board on Geographic

141-15   Names of the United States Department of the Interior for naming

141-16   any natural or cultural feature subject to the limitations provided

141-17   by Subsection (d) of this section;

141-18               (4)  make recommendations to the Department of

141-19   Information Resources to adopt and promote standards that

141-20   facilitate sharing of digital natural resource data and related

141-21   socioeconomic data among federal, state, and local governments and

141-22   other interested parties;

141-23               (5)  acquire and disseminate natural resource and

141-24   related socioeconomic data describing the Texas-Mexico border

141-25   region; and

141-26               (6)  coordinate, conduct, and facilitate the

141-27   development, maintenance, and use of mutually compatible statewide

141-28   digital base maps depicting natural resources and man-made

141-29   features.

 142-1         (d)  A recommendation may not be made under Subdivision (3)

 142-2   of Subsection (c) of this section for:

 142-3               (1)  a feature previously named under statutory

 142-4   authority or recognized by an agency of the federal government, the

 142-5   state, or a political subdivision of the state;

 142-6               (2)  a feature located on private property for which

 142-7   consent of the property owner cannot be obtained; or

 142-8               (3)  naming a natural or cultural feature for a living

 142-9   person.

142-10         SECTION 6.03.  On September 1, 1997, the Texas Natural

142-11   Resources Information System Task Force and the Texas Geographic

142-12   Information Systems Planning Council are merged into the Texas

142-13   Geographic Information Council.  All designated member agencies of

142-14   both predecessor entities shall continue to serve as member

142-15   agencies of the Texas Geographic Information Council.

142-16                  ARTICLE 7.  EFFECTIVE DATE; EMERGENCY

142-17         SECTION 7.01.  (a)  Except as provided by Subsections (b)

142-18   through (e) of this section, this Act takes effect September 1,

142-19   1997.

142-20         (b)  This section and Sections 1.04, 2.03, 2.09, 2.10, and

142-21   2.13 of this Act take effect immediately.

142-22         (c)  Section 3.54 of this Act takes effect on the first day

142-23   of the first calendar quarter beginning on or after the date that

142-24   it may take effect under Section 39, Article III, Texas

142-25   Constitution.

142-26         (d)  The change in law made by Section 3.54 of this Act to

142-27   Section 151.318, Tax Code, does not affect taxes imposed before the

142-28   effective date of Section 3.54 of this Act, and the law in effect

142-29   before the effective date of that section is continued in effect

 143-1   for purposes of liability for and collection of those taxes.

 143-2         (e)  Sections 4.03 and 4.05 through 4.08 of this Act take

 143-3   effect on the date on which the constitutional amendment proposed

 143-4   by _.J.R. No. ___, 75th Legislature, Regular Session, 1997, takes

 143-5   effect.  If that amendment is not approved by the voters, those

 143-6   sections have no effect.

 143-7         SECTION 7.02.  The importance of this legislation and the

 143-8   crowded condition of the calendars in both houses create an

 143-9   emergency and an imperative public necessity that the

143-10   constitutional rule requiring bills to be read on three several

143-11   days in each house be suspended, and this rule is hereby suspended,

143-12   and that this Act take effect and be in force according to its

143-13   terms, and it is so enacted.